FICC Focus Investor Survey, Trade War and Dollar, 2H Outlook: Credit Crunch
Jul 9, 2025
Thomas Samson, a High Yield Portfolio Manager at Muzinich & Co., oversees a massive €4 billion portfolio. He discusses the results from Bloomberg Intelligence’s latest investor survey on credit markets and analyzes the strong recovery in high yield during the first half of the year. Thomas delves into dollar flows into euro-denominated assets, the effects of the trade war on market dynamics, and investor sentiment moving into the second half. He also touches on private credit trends and the implications for default rates.
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Strong Technicals Sustain Positive Returns
- European high yield remains positive due to strong market technicals despite macro challenges.
- Limited net supply and many investors waiting for better entry points support ongoing strength.
Dollar Investors Favor Euro High Yield
- Dollar-based investors are attracted to euro high yield due to economic returns and favorable currency hedging benefits.
- The hedging facility offers a fixed 2.4% cost benefit, enhancing euro-denominated asset appeal.
Investors Overweight High Yield
- Investors show an 8% net overweight in high yield portfolios at highest since early 2023.
- Break-even spreads near 200 basis points justify sustained overweight despite tight valuations.