FICC Focus High Yield 2Q Investor Survey, Views Amid Tariffs: Credit Crunch
Apr 9, 2025
In this engaging discussion, Per Wehrmann, Head of European high yield at DWS Investments GmBH, shares his expertise on the shifting landscapes of investor sentiment and market dynamics. He and Mahesh Bhimalingam analyze the recent downturn in high yield markets, driven by rising default concerns and trade tensions. The conversation highlights the cautious stance of investors, their increasing cash holdings, and the impact of central bank policies. They also explore which sectors are favored and the implications for future performance.
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Pre-March High-Yield Market
- European high-yield experienced a long period of stability and low volatility before March.
- Rate volatility was often offset by spread movements, resulting in stable total returns.
High-Yield Valuations Pre-March
- High-yield valuations were considered rich before March due to central bank support and okay corporate fundamentals.
- Market sentiment suggested a "priced for perfection" scenario, where even small deviations could trigger corrections.
Current High-Yield Valuation
- The current market, impacted by the trade war, presents attractive valuations in a base case scenario.
- However, uncertainty around tariffs and their impact on fundamentals creates downside risk.