European credit is starting to perform like European sovereigns
With the clustering of losses in sovereign balance sheets of the PIIGS, bond spreads widen are widening on all credit products. European credit markets are seeing a rise in volatility and contagion risk. We bailouts happen, credit markets suffer. Credit markets are pointless when you have a steep yield curve like we do now. Via Pimco:
•The growing risk of contagion, heightened volatility and the blurring of credit quality in much of the European credit market are posing challenges for European credit investors.
•Adding to the woes of the eurozone’s debt expansion are concerns around deflation.
•Active security selection and bottom-up credit analysis will likely prove essential in mitigating risks and in unearthing new corporate credit opportunities in both European and global markets.