European High-Yield Corporate Debt Likely to Continue to Price Out Default Risk — Market Talk
2021-01-04 11:02:24.534 GMT

(Dow Jones) — 1102 GMT – Despite a large portion of default risk already
being priced out from euro-denominated high-yield corporate debt, spreads will
continue to narrow throughout this year, Spread Research says. « We expect the
overall euro high-yield market to post a total return between 3.5% and 4% in
2021, » implying 60-75 basis points of tightening in spreads, the independent
credit-rating firm says. Credit spreads on debt issued by European companies
with fragile balance sheets are almost back to pre-Covid-19 levels, reflecting
unprecedented levels of quantitative easing from central banks in response to
the pandemic-led economic crisis and investor demand for yield. « Now the
market is almost back to square one…running at yields of 3.4% on
average–pretty close to pre-Covid 19 crisis despite +50bp of spread widening
last year, » it says. (lorena.ruibal@wsj.com)

(END) Dow Jones Newswires