{"id":4462,"date":"2023-10-23T03:53:03","date_gmt":"2023-10-23T03:53:03","guid":{"rendered":"https:\/\/infundpros.com\/business\/investors-demand-highest-premium-in-years-to-hold-risky-european-debt\/"},"modified":"2023-10-23T03:53:03","modified_gmt":"2023-10-23T03:53:03","slug":"investors-demand-highest-premium-in-years-to-hold-risky-european-debt","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=4462","title":{"rendered":"Investors demand highest premium in years to hold risky European debt"},"content":{"rendered":"<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=6ccf50b5-c210-406d-b795-0c3705b32d2c\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Europe\u2019s riskiest corporate borrowers are paying the highest premium in seven years to tap the region\u2019s \u20ac412bn junk bond market, highlighting growing fears that a long period of high interest rates and an economic slowdown could trigger further defaults.<\/p>\n<p>The so-called \u201cspread\u201d \u2014 or gap \u2014 between the yields on euro-denominated corporate debt rated triple C or lower and government paper has widened to more than 18 percentage points on average, according to an ICE BofA index.<\/p>\n<p>That marks the biggest spread since June 2016 and surpasses levels seen in 2020 when the Covid-19 crisis triggered fears of messy defaults and bankruptcies. At the start of last year, the spread was as low as 6.7 percentage points. <\/p>\n<p>Government bond yields have soared on both sides of the Atlantic in recent weeks, dragged skywards by concerns that both the Federal Reserve and the European Central Bank will keep interest rates \u2018higher for longer\u2019 to get inflation under control. But corporate bond yields have climbed at an even faster pace.<\/p>\n<p>Expanding spreads indicate that bondholders are demanding larger premiums to compensate them for the risk of a default.<\/p>\n<p>European companies that have defaulted on bonds or loans in recent months include French retailer Casino Guichard-Perrachon, Netherlands-based manufacturer Keter and Belgium-based Ideal, according to rating agency Moody\u2019s.<\/p>\n<p>Analysts and investors said the widening of risky European spreads underscored persistent concerns over the health of the region\u2019s economy. They also pointed to structural issues within Europe\u2019s high-yield bond market \u2014 including its lack of depth and liquidity \u2014 which have fuelled sharper moves than those in the same asset class in the US.<\/p>\n<p>\u201cI think the economic backdrop in Europe is definitely worse than in the US,\u201d said Christian Hantel, a corporate bond portfolio manager at Swiss firm Vontobel. The widening of spreads \u201chas to be seen in the context of slower economic growth, the aggressive interest rate hikes and the ongoing elevated inflation numbers\u201d. <\/p>\n<figure class=\"n-content-image n-content-image--full\"><picture><source media=\"(min-width: 700px)\"  width=\"1400\" height=\"1000\"><\/source><source media=\"(max-width: 490px)\"  width=\"600\" height=\"800\"><\/source><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/https:\/\/d6c748xw2pzm8.cloudfront.net\/prod\/d130b770-6df5-11ee-a1e2-296ac1bb7bf2-standard.pn.png\" alt=\"Line chart of Index spreads (percentage points) showing Risky European companies pay highest borrowing premium since 2016\" data-image-type=\"graphic\" width=\"1400\" height=\"1000\"><\/picture><\/figure>\n<p>Many more North American companies have defaulted on their debt so far this year compared with Europe. Spreads for triple-C rated bonds in the US have also yawned wider since the end of the summer, as markets have increasingly priced in expectations of interest rates staying elevated well into next year. But they remain tighter than their European counterparts at roughly 10 percentage points, around levels seen just a few months ago.<\/p>\n<p>Very low-grade European borrowers also suffer from having a narrower investor base than their counterparts in the US, where the high-yield bond market is $1.3tn (\u20ac1.1tn) in size, say analysts. <\/p>\n<p>\u201cEurope has a bank-based financial system. The US has a market-based financial system,\u201d said Torsten Sl\u00f8k, chief economist at Apollo. \u201cThere\u2019s much fewer places to go in Europe \u2014 you can really only basically go to the banking sector, because credit markets just play a much smaller role.\u201d<\/p>\n<p>That relatively small market size also allows for individual credits to have a disproportionate influence over the direction of an index or sub-index.<\/p>\n<p>A bond issued by the heavily indebted French telecoms group Altice, yielding 29 per cent and maturing in May 2027, has the largest weighting in Europe\u2019s triple-C high-yield gauge, at 4.7 per cent. Its spread has widened to more than 28 percentage points from less than 26 percentage points in late September, Bloomberg data shows.<\/p>\n<p>\u201cIdiosyncratic names [can] push the [index\u2019s] spread out,\u201d said Anton Dobrovskiy, investment specialist on the euro high-yield team at T Rowe Price, adding that risk aversion linked to the Israel-Hamas war was also likely to have amplified moves in European credit spreads this month.<\/p>\n<p>Times of market and economic uncertainty typically hit the lowest-grade companies hardest, noted Vontobel\u2019s Hantel. <\/p>\n<p>\u201cTriple-Cs are the weakest link of the high-yield universe and the corporate credit market in general,\u201d he said. \u201cIt\u2019s not a surprise that we see more stress here.\u201d<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.ft.com\/content\/6ccf50b5-c210-406d-b795-0c3705b32d2c\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. Europe\u2019s riskiest&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":{"0":"post-4462","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Investors demand highest premium in years to hold risky European debt | inFundPros<\/title>\n<meta name=\"description\" content=\"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe\u2019s riskiest corporate\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/infundpros.com\/?p=4462\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Investors demand highest premium in years to hold risky European debt | inFundPros\" \/>\n<meta property=\"og:description\" content=\"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe\u2019s riskiest corporate\" \/>\n<meta property=\"og:url\" content=\"https:\/\/infundpros.com\/?p=4462\" \/>\n<meta property=\"og:site_name\" content=\"inFundPros\" \/>\n<meta property=\"article:published_time\" content=\"2023-10-23T03:53:03+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/https:\/\/d6c748xw2pzm8.cloudfront.net\/prod\/d130b770-6df5-11ee-a1e2-296ac1bb7bf2-standard.pn.png\" \/>\n<meta name=\"author\" content=\"Press Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Press Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/infundpros.com\/?p=4462#article\",\"isPartOf\":{\"@id\":\"https:\/\/infundpros.com\/?p=4462\"},\"author\":{\"name\":\"Press Room\",\"@id\":\"https:\/\/infundpros.com\/#\/schema\/person\/87f7e632b195ea95c91503d9281f5eff\"},\"headline\":\"Investors demand highest premium in years to hold risky European debt\",\"datePublished\":\"2023-10-23T03:53:03+00:00\",\"dateModified\":\"2023-10-23T03:53:03+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/infundpros.com\/?p=4462\"},\"wordCount\":669,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/infundpros.com\/#organization\"},\"articleSection\":[\"Business\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/infundpros.com\/?p=4462#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/infundpros.com\/?p=4462\",\"url\":\"https:\/\/infundpros.com\/?p=4462\",\"name\":\"Investors demand highest premium in years to hold risky European debt | inFundPros\",\"isPartOf\":{\"@id\":\"https:\/\/infundpros.com\/#website\"},\"datePublished\":\"2023-10-23T03:53:03+00:00\",\"dateModified\":\"2023-10-23T03:53:03+00:00\",\"description\":\"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe\u2019s riskiest corporate\",\"breadcrumb\":{\"@id\":\"https:\/\/infundpros.com\/?p=4462#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/infundpros.com\/?p=4462\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/infundpros.com\/?p=4462#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/infundpros.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Investors demand highest premium in years to hold risky European debt\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/infundpros.com\/#website\",\"url\":\"https:\/\/infundpros.com\/\",\"name\":\"Fintech Advance\",\"description\":\"Latest Finance and Tech News and Updates\",\"publisher\":{\"@id\":\"https:\/\/infundpros.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/infundpros.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/infundpros.com\/#organization\",\"name\":\"Fintech Advance\",\"url\":\"https:\/\/infundpros.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/infundpros.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/tech-logo.png\",\"contentUrl\":\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/tech-logo.png\",\"width\":409,\"height\":70,\"caption\":\"Fintech Advance\"},\"image\":{\"@id\":\"https:\/\/infundpros.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/infundpros.com\/#\/schema\/person\/87f7e632b195ea95c91503d9281f5eff\",\"name\":\"Press Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/infundpros.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/avatar_user_1_1697230663-96x96.png\",\"contentUrl\":\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/avatar_user_1_1697230663-96x96.png\",\"caption\":\"Press Room\"},\"sameAs\":[\"https:\/\/infundpros.com\"],\"url\":\"https:\/\/infundpros.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Investors demand highest premium in years to hold risky European debt | inFundPros","description":"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe\u2019s riskiest corporate","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/infundpros.com\/?p=4462","og_locale":"en_US","og_type":"article","og_title":"Investors demand highest premium in years to hold risky European debt | inFundPros","og_description":"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe\u2019s riskiest corporate","og_url":"https:\/\/infundpros.com\/?p=4462","og_site_name":"inFundPros","article_published_time":"2023-10-23T03:53:03+00:00","og_image":[{"url":"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/https:\/\/d6c748xw2pzm8.cloudfront.net\/prod\/d130b770-6df5-11ee-a1e2-296ac1bb7bf2-standard.pn.png"}],"author":"Press Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Press Room","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/infundpros.com\/?p=4462#article","isPartOf":{"@id":"https:\/\/infundpros.com\/?p=4462"},"author":{"name":"Press Room","@id":"https:\/\/infundpros.com\/#\/schema\/person\/87f7e632b195ea95c91503d9281f5eff"},"headline":"Investors demand highest premium in years to hold risky European debt","datePublished":"2023-10-23T03:53:03+00:00","dateModified":"2023-10-23T03:53:03+00:00","mainEntityOfPage":{"@id":"https:\/\/infundpros.com\/?p=4462"},"wordCount":669,"commentCount":0,"publisher":{"@id":"https:\/\/infundpros.com\/#organization"},"articleSection":["Business"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/infundpros.com\/?p=4462#respond"]}]},{"@type":"WebPage","@id":"https:\/\/infundpros.com\/?p=4462","url":"https:\/\/infundpros.com\/?p=4462","name":"Investors demand highest premium in years to hold risky European debt | inFundPros","isPartOf":{"@id":"https:\/\/infundpros.com\/#website"},"datePublished":"2023-10-23T03:53:03+00:00","dateModified":"2023-10-23T03:53:03+00:00","description":"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Europe\u2019s riskiest corporate","breadcrumb":{"@id":"https:\/\/infundpros.com\/?p=4462#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/infundpros.com\/?p=4462"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/infundpros.com\/?p=4462#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/infundpros.com\/"},{"@type":"ListItem","position":2,"name":"Investors demand highest premium in years to hold risky European debt"}]},{"@type":"WebSite","@id":"https:\/\/infundpros.com\/#website","url":"https:\/\/infundpros.com\/","name":"Fintech Advance","description":"Latest Finance and Tech News and Updates","publisher":{"@id":"https:\/\/infundpros.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/infundpros.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/infundpros.com\/#organization","name":"Fintech Advance","url":"https:\/\/infundpros.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/infundpros.com\/#\/schema\/logo\/image\/","url":"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/tech-logo.png","contentUrl":"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/tech-logo.png","width":409,"height":70,"caption":"Fintech Advance"},"image":{"@id":"https:\/\/infundpros.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/infundpros.com\/#\/schema\/person\/87f7e632b195ea95c91503d9281f5eff","name":"Press Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/infundpros.com\/#\/schema\/person\/image\/","url":"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/avatar_user_1_1697230663-96x96.png","contentUrl":"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/avatar_user_1_1697230663-96x96.png","caption":"Press Room"},"sameAs":["https:\/\/infundpros.com"],"url":"https:\/\/infundpros.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/infundpros.com\/index.php?rest_route=\/wp\/v2\/posts\/4462","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/infundpros.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/infundpros.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/infundpros.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/infundpros.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4462"}],"version-history":[{"count":0,"href":"https:\/\/infundpros.com\/index.php?rest_route=\/wp\/v2\/posts\/4462\/revisions"}],"wp:attachment":[{"href":"https:\/\/infundpros.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4462"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/infundpros.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4462"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/infundpros.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4462"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}