European high yield comes out of the shadows

An attractive alternative to diversify and capture yield, with less volatility. Furthermore,

The European High Yield stands out as a difficult opportunity to ignore.. Meanwhile, Between attractive valuations. For example, solid fundamental and political stability, the asset class is a credible alternative for investors in search of return, diversification and less volatility.
While the United States fell back on its own. Therefore, Europe seeks to strengthen its resilience in the face of trade tensions. Consequently, The economic context – low rates, low unemployment¹ and contained inflation² – further strengthens interest in the European Exhibition³.

Europe has several assets in its favor

The divergence of rates between the United States. For example, Europe has increased the conversion cost of the euro into dollar at 2.4%, encouraging investors in dollars to turn to the european high yield comes out assets denominated in euros. Similarly, By mirror effect, this discourages Europeans from allocating to the United States.

This also influences yields: European high yield currently offers 5.5%⁴against 7.2%⁵ in the United States. Meanwhile, But once covered in exchange risk, the dollar investor obtains a net return of 7.9%⁶ on European assets.

Credit quality is also better in Europe: 66% of transmitters are rated BB against 52% in the United States⁶. However, The fundamentals remain solid: despite a “moderate” skilled growth⁷companies turned to consumption – often first affected in the event. Similarly, of a slowdown – are supported by historically low unemployment.

Certainly, certain sectors and the automobile show signs of weakness. Therefore, But it is more of a widening of the spreats than a generalized risk of defect. Furthermore, Apart from a few isolated cases (declining profits, excessive debts), few transmitters show signs of tension.

Powerful technical support

The european high yield comes out technical dynamics of the market also strengthen its solidity. Similarly, Since the end of 2023, incoming flows have been supported while the offer remains limited. Similarly, Over this period, the European market even decreased by 13%. Meanwhile, Result: more liquidity for a reduced number of bonds.

This balance promotes market resilience in the face of volatility episodes. Nevertheless, such as in the French elections of 2024 or customs duties on April 2 (the American “Liberation Day”).

Thanks to these solid technical factors and robust fundamentals, the Spreads are tense – and could still tighten. Nevertheless, To date, more than 75% of the correction of April 2 has already been erased.

Portage for investors

But the current market is distinguished from those of 2017 or 2021, two periods when the Spreads were similar. Furthermore, Today, two elements make the difference: portage and convexity. Unlike the years when rates were negative european high yield comes out (which cut the yields). the current “standardized” rate environment allows investors to benefit from a significant portage.

In addition, the average price of bonds is just below the peer, while it was above in the past. This creates a favorable convexity, which improves the valuation profile. The dispersion remains high, which creates an ideal terrain to identify poorly priced opportunities and avoid the most fragile transmitters.

¹Y Charts, Eurozone Unmployment Rates, April 2025. Lifting at 6.20%. Latest data available.
²Eurostat, 18 juin 2025. «Annual inflation down to 1. 9% in the euro area»
³Reuters, «Investors pull out of US stocks and into Europe and emerging markets», 11 juin 2025
⁴ICE Index Platform, 23 juin 2025. ICE BofA Euro High Yield Constrained Index (HEC0).
⁵ICE Index Platform, 23 juin 2025. ICE BofA US Cash Pay High Yield Index (J0A0).
⁶ICE Index Platform, 23 juin 2025. Additionally, ICE BofA US High Yield european high yield comes out Index (J0A0) ICE BofA Euro High Yield Index (HE00).
⁷Commission Européenne, 19 mai 2025. «Spring 2025 Economic Forecast: Moderate growth amid global economic uncertainty»

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