Chart of the Week
After experiencing significant volatility and a downturn in March and April, European bond markets managed to regain positive momentum in just a few weeks. Year-to-date, Investment Grade, High Yield, and AT1 subordinated debt have all delivered positive performances for 2025, with spreads now returning to their levels from early January.
OUR ANALYSIS
The turbulent news of recent months has shown the fixed income market’s resilience in the face of external shocks. Notably, the Investment Grade segment has experienced limited volatility, High Yield bonds have performed well due to high carry and short maturities, and AT1 financial subordinated debt has made a strong comeback, benefiting from the solid fundamentals of European banks.
Additionally, despite narrower spreads, yields to maturity remain above inflation-around 3% for Investment Grade and 6% for High Yield and AT1 subordinated debt-compared to stable inflation at 2.2% in the eurozone as of April 2025 (according to Eurostat data over the past 12 months).
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Written on 16 May 2025. Opinions subject to change.
See also: Banks: earnings prospects remain healthy
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