UniCredit Research analysts in Italy said in a report that European companies have stable credit indicators, and default rates are expected to drop as a result. European companies are still showing steady profit growth, which is reflected in the steady momentum of ratings in the investment-grade sector, while ratings in the high-yield sector have deteriorated only slightly. The number of junk bond ratings downgraded, known as “fallen angels,” is also expected to decline. The default rate and junk debt prevalence rate is likely to decline after reaching a peak. This should support the low volatility of European corporate credit spreads, thereby boosting arbitrage preferences for this asset class.

UniCredit Research analysts in Italy said in a report that European companies have stable credit indicators, and default rates are expected to drop as a result. European companies are still showing steady profit growth, which is reflected in the steady momentum of ratings in the investment-grade sector, while ratings in the high-yield sector have deteriorated only slightly. The number of junk bond ratings downgraded, known as “fallen angels,” is also expected to decline. The default rate and junk debt prevalence rate is likely to decline after reaching a peak. This should support the low volatility of European corporate credit spreads, thereby boosting arbitrage preferences for this asset class.