- Evidence of growing concerns over high inflation, rate hikes and central banks withdrawing their asset purchasing support programmes has been particularly visible in European bond markets.
- After their initial spikes in March 2020 from the coronavirus shock, the spreads of European investment grade and high yield credits significantly compressed as central banks implemented broad QE programmes (including for the sub-IG high yield sector) and interest rate cuts to ease financial conditions.
- European markets were really spooked when the EU had placed Italy on its watch list of countries for not complying with its debt reduction programme to correct excessive public debt burdens.
For further details see:
Reopening Old Wounds - Could Wider European Credit Spreads Signal More To Come?