Chart of the Week
Since the beginning of February 2025, some tensions have emerged in European bond markets. On 5 March, benchmark rates notably surged following Ursula von der Leyen’s announcement of the €800 billion ‘ReArm Europe’ plan.
It’s worth noting that this movement had a limited impact on the European High Yield market, unlike other market segments which proved more sensitive to it.
OUR ANALYSIS
The events of 5 March showcased the High Yield segment’s ability to withstand certain shocks. This market has particularly benefited from the short average maturity of its securities (currently under 4 years), which makes it relatively less sensitive to the risk of rising interest rates. In contrast, other segments are more vulnerable due to their longer maturities.
European High Yield also benefited from a narrowing of spreads (-14 bps on 5 March). Markets viewed the ‘ReArm Europe’ plan as a form of fiscal stimulus favourable to European growth, hence the tightening of spreads in the High Yield segment, which coincided with a positive trend in European equities.
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Written on 7 March 2025. This is not an investment advice. Opinions subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/us-inflation-fears-resurface-among-consumers/
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