Menu Our services in the selected location:
  • No services available for your region.
Select Location:
Remember my selection
Your browser is out of date. It has known security flaws and may not display all features of this and other websites
We have been made aware that there are external parties falsely claiming to carry out financial services on behalf of Goldman Sachs (including Goldman Sachs Asset Management International and Goldman Sachs International) in order to market fake investment products and to solicit monetary payments. These external parties may pose as Goldman Sachs through the use of fraudulent communications via email, instant messaging or phone, as well as through the use of fake brochures and other documents containing Goldman Sachs branding and logos.
The Financial Conduct Authority of UK has issued warnings about these fraudulent activities which can be found here and here.
It is important to know that any communication you receive from Goldman Sachs would only come from an @gs.com e-mail address and/or be found on the goldmansachs.com website. Further information regarding how you can protect yourself from fraudulent activity online and how you can contact us about this can be found on the Goldman Sachs Security page, available here.    

Disclaimer

By clicking the "I Accept" button, you agree to abide by the terms and conditions listed below.

Select your country:


July 29, 2020 | GSAM Connect

Corporate credit on both sides of the Atlantic

Year-to-date checkpoint
European corporate credit cash bonds (both investment grade and high yield) outperformed the US during the February and March twin oil-virus shock. However, since March 23—when the US Federal Reserve (Fed) announced its corporate bond buying programs—US cash bonds have posted a stronger recovery relative to Europe, despite elevated new US bond issuance. This implies that prior to the Fed’s policy announcement, illiquidity and outflows had led to a sharper widening in US credit spreads relative to Europe. This is not too surprising, given the European Central Bank (ECB) was purchasing European bonds pre-virus, thereby supporting liquidity.

Among credit derivatives, European investment grade (iTraxx Main) has slightly outperformed the US (CDX IG) since credit markets bottomed in late March. European derivatives outperformance has been greater in high yield (as reflected by iTraxx Crossover performance relative to CDX HY). This is likely due to higher default activity among US high yield issuers, with seven defaulting since March; this contrasts with no default-related losses in Europe. A higher exposure to energy in the US also explains divergence between European and US high yield credit derivatives.

Where do we go from here?
Looking ahead, the policy environment in both the US and Europe remains supportive, with the ECB buying bonds through to 2021 and the Fed recently extending its credit facilities to year-end. That said, we think variation in underlying credit fundamentals will begin to play a more prominent role, particularly in the US, once the liquidity tailwind from central bank policies is largely priced.

Opportunities in European corporate credit
The economic recovery in Europe is more advanced than the US due to better coronavirus suppression. In addition, a recent agreement on the EU Recovery Fund raises hopes for further fiscal integration and as mentioned above, ECB policy remains ultra-easy. This macro backdrop is supportive for European corporate credit issuers. Moreover, European investment grade corporate credit continues to offer attractive yields relative to sovereign bonds in the region which remain bounded by a negative ECB policy rate.

European investment grade offers attractive yields relative to sovereign bonds

Source: Macrobond, GSAM, Bloomberg Barclays European Corporate Index. As of 29 July 2020. Effective index duration is 5.9 years.

Stay posted on the latest market developments and key themes for your portfolios and practices.
Get Connected

Related Insights

June 2020 | GSAM Connect
Looking Back to Move Forward

US corporate earnings moderated in the first quarter, reflecting stay-at-home orders that came into effect in March.

May 2020 | GSAM Connect
Five Key Takeaways from First Quarter Earnings Season

US corporate earnings moderated in the first quarter, reflecting stay-at-home orders that came into effect in March.