Never Before Has the European Credit Landscape Been This Boring - or This Interesting
Angel figurines hang on display in the gift shop at the Wendt & Kuehn KG traditional wooden festive decoration factory in Gruenhainichen, Germany.
Photographer: Krisztian Bocsi/BloombergIt's a B-B-Boring world in corporate bonds and investors just live in it.
The share of investment grade corporate debt rated BBB — or just above the cut-off point that turns into speculative high-yield territory — has never been higher in Europe, according to a new note by analysts at HSBC Holdings Plc. They argue that ultra-low interest rates and newly conservative rating agencies have effectively turned the market into a homogeneous clump ripe for differentiation by savvy investors.
"In a low rate environment, where many BBB companies can issue at less than 1 percent in euros, there is little incentive to be single A or higher," write analysts led by HSBC's Head of European Credit Strategy James Stuttard. Conversely, the proportion of bonds rated 'BB' - the top level of speculative or high-yield territory — has also been growing, as shown in the below right-hand chart.