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Euro IG Credit Outlook Q4 2025
Fixed Income Boutique
En bref
- Strong Technical Demand: Institutional flows into Euro IG bonds remain robust, while the levels of cash-like assets in investors' portfolios are still substantially above historical trends, and net issuance levels remain low.
- Stabilizing Macro Environment: Inflation in the Eurozone aligns with the ECB’s 2% target, while central banks, including the Fed and ECB, continue rate cuts to support economic growth.
- Solid Credit Fundamentals: Corporate leverage in Europe remains stable, with no signs of broad re-leveraging, and 2026 earnings growth expectations are strong for both Europe and the US.
- Attractive Valuations: All-in yields for Euro IG credit remain appealing, and spreads are expected to trade sideways, with further rate cuts supporting total returns.
- Sector Preferences: Favorable sectors include subordinated banking and insurance, telecoms, utilities, and transportation including hybrids, with selective exposure to high-quality real estate and auto-parts. Regionally, the focus should be on peripheral national champions, and curve-wise on the 6 to 10 years bucket that may provide significant roll down effects.
- Outlook for Returns: Despite the yield peak having passed, spreads are stable, and total returns remain compelling, making Euro IG credit an attractive investment option.
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Europe
European Corporate Bonds
Fixed Income Boutique
Macroeconomics
Monetary Policy
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