Analysts at UniCredit Bank Italia suggest that euro-denominated corporate bonds could undergo minor fluctuations this week prior to the release of significant data, including the Eurozone CPI figures on Thursday and the US employment data on Friday.
They state, “Despite the positive tone of equities today, which favors risk sentiment in the European corporate credit market, we believe that the room for spread tightening is very limited given the level of credit crunching, especially in high-yield non-financials.”
The analysts point out that Eurozone money supply data released this week indicates a deceleration in bank lending to businesses, raising the possibility of increased corporate bond issuance and widening spreads.
“We expect high-yield credit spreads to widen by about 20 basis points from current levels by the end of the year.”
