60 seconds on three reasons for optimism about European credit in 2015

For the rest of 2015 we continue to have a positive view on European credit markets, which is driven by three factors:

  • Economic growth is on an improving trend
  • Inflation is bottoming out and should increase from this point
  • The European Central Bank monetary policy will remain highly accommodative well into 2016

This means that the number of companies defaulting on their debts should remain low.

European and US credit markets diverging

We think company management teams will continue to remain bond-holder friendly.

They are not indulging in the same level of mergers and acquisitions that we have seen in the US, nor are they increasing dividends at the same rate as companies in the US.

Overall, we are seeing a divergence in credit quality between the two markets and that is the reason why we continue to prefer European credit.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Registered Office at 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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