European High Yield Survey Q3 2021

The Q3 2021 European High Yield Survey Results Are In!

Thank you to Everyone who took part, especially to Mahesh and Bhumika for their analysis.

European High Yield is viewed expensive with an increase in respondents seeing the asset class as rich. Central Banks are where investors are placing their trust with monetary policy being the main driver of returns in the next quarter – more so than Covid, rising rates or Fiscal policy. Defaults are expected to remain low – no worries about about liquidity in this market – distressed names being able to raise capital and any unwind of support appears to be a problem for the future.

That said, more investors are clearly focusing on quality – BBs no longer have any underweight when it comes to positioning whilst the underweight in CCC’s has only increased. For the first time in the survey’s history respondents expect Europe to outperform the US. USHY’s now negative inflation adjusted yields reflect the power of the reach for yield. In the land of the blind the one eyed man is king and European High Yield is expected to benefit from the continued reach for yield.

Despite the flood of issuance – more than 75% of respondents have 3% or more cash on balance sheet and this is expected to be enough to mop up the expected €13.5 bn of issuance and support secondary spreads.

The full analysis by Bloomberg Intelligence can be downloaded here

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