European High Yield Q3 ’22 Investors Survey

The Results Are In!

First off a big thank you to everyone who took part – the survey has an enormous readership with over 3000 plus hits on the terminal.

So people really do want to hear your view – if you haven’t taken part and can please take the time to share your wisdom.

Finally thanks to Mahesh for the analysis. There will be a webinar on the Second of August join EHYO to be notified and we will send you the link. Mahesh and I will go through the survey results and questions from the audience – the idea is to make more than just a survey and bring value to those that took part.

Investors are More Bearish But See Value in High Yield

Spreads are cheap in investor’s eyes and have stored up plenty of cash. Positioning as well as supply expectations for the quarter (c.€10bn) are both supportive technicals for the market.

That said the macro outlook is what is driving Investors negative sentiment.

Rising rates and central bank policies are seen as the top drivers for spreads in Q3. These clearly fall into the camp of known known’s – and the market is in someways already looking ahead to a recessionary environment and focussing (wishing for) on a central banks being forced to pivot.

Interestingly, the Russina invasion of Ukraine takes a back seat in terms of drivers – despite in my mind being the biggest known unknown – any ceasfire is likely to have a large (but short?) impact on markets.

As we enter Q3 earnings season there has been a ton of commentary about expected earnings downgrades. this week’s PMI data from the US and Europe all point to a slowing of economic growth and consumer sentiment is also at the lows.

One of the questions I have for our webinar is “Are we at peak Bearishness?”. Sentiment wise it certainly feels it, but in terms of corporate balance sheets we have some quarters to go IMHO. Looking at the default expectations in the survey are picking up at 2.6 index defaults expected for Q3.

Corporate fundamentals are at the fore with investors favouring BB credits and underweighting CCC rated bonds. Sector wise net overweights are in Communication and Banking. Net underweights are in Consumer Cylicals and Transportation.

Post any questions you have for the webinar in the comments box below and we will include them in the Q&A

You can download the Survey here: