Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley, interviews Aron Becker, Head of European Credit Strategy, about the European credit outlook. The discussion centers on the slowing economic growth in Europe and the U.S., its impact on European companies (given their significant U.S. revenue exposure), and the implications for credit investors. Despite a challenging macroeconomic picture, the relatively tight credit spreads, particularly in investment grade, are attributed to factors like decelerating inflation, easing monetary policy by the ECB and Bank of England, and attractive credit yields. The conversation also touches upon the increased government borrowing, record corporate bond issuance, and the resulting technical backdrop for investors. The interview concludes with Becker's recommendation for investors to extend duration further out the curve in European credit, citing attractive valuations, limited long-dated supply, and potential for bull steepening yield curves.
