Halister News

(Bloomberg) -- Europe’s domestically focused credits stand to outperform those that are more export-oriented in 2017, BofAML credit strategists including Barnaby Martin write in client note.

• Main domestically focused sectors are seen as retail, telecoms, utilities, insurance and banks
• Expect to see a more powerful reach for yield, with corporate hybrids and European high-yield likely to benefit as total returns in high-beta credit start to stand out
• The “unsteady” state that exists in credit at the moment is that bank spreads trade wider than corporate spreads
  • Wide bank spreads pressure the outlook for banks’ lending volumes, especially if negative yielding debt is a funding alternative for big corporates
  • Bank senior spreads currently much wider than corporate spreads in Germany and Italy (and to a lesser extent France); suggest a tightening of bank senior spreads “would be most welcome”