Fixed Income

60 seconds on three reasons for optimism about European credit in 2015

Michael Scott

Michael Scott

Fund Manager - Fixed Income

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For the rest of 2015 we continue to have a positive view on European credit markets, which is driven by three factors:

  • Economic growth is on an improving trend
  • Inflation is bottoming out and should increase from this point
  • The European Central Bank monetary policy will remain highly accommodative well into 2016

This means that the number of companies defaulting on their debts should remain low.

European and US credit markets diverging

We think company management teams will continue to remain bond-holder friendly.

They are not indulging in the same level of mergers and acquisitions that we have seen in the US, nor are they increasing dividends at the same rate as companies in the US.

Overall, we are seeing a divergence in credit quality between the two markets and that is the reason why we continue to prefer European credit.

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