A sweet spot for euro investment grade investors

After 2022, which covered the end of a decade of monetary policy loosening, 2023 has been the year of the repricing of the whole interest rate curve. The end of Central Banks’ "higher for longer" mantra supported a steepening of the yield curves and repriced real interest rates which are back now in positive territory, for the first time in close to ten years. European Investment grade yields stand at a very attractive level around 3.6%[1] today, from close to the 0% level seen during Covid crisis.
Furthermore, credit spreads, the premium of investment grade credit, are attractive. While still evolving significantly above their historically average, they have also been stable and supported by resilient corporate fundamentals, lower than expected funding needs, and inflows into the asset class.
With higher yields, the investment-grade credit market offers an attractive risk/return ratio compared with other asset classes - an optimal configuration for credit investors. With higher rates and high spreads, it offers an attractive risk/return ratio compared to other asset classes - a sweet spot for credit investors.

  • Patrick Zeeni
    Head of Investment Grade & Credit Arbitrage

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