European investment grade issuance came in at €6 billion last week, according to Morgan Stanley data, with year-to-date (YTD) volumes tracking at €170 billion, now down 3% year-on-year (YoY). High yield saw no issuance, meanwhile, although with €23 billion issued YTD overall supply is still up 40% YoY.
Given secondary market activity levels, there will be little reprieve for buy-side traders in Europe as a result of reduced primary market activity.
Issuers will likely want to access markets ahead of any rate rises, but in the current volatile environments investors will be cautious, making engagement with bond buyers harder as they seek out protection in the most affected markets.
“Spreads continued to widen across CDS indices, with CDX IG and iTraxx Main ending the week 2bp and 6bp wider, respectively,” noted Morgan Stanley analysts, “Implied volatility rose for the fifth straight week. DTCC data as of 27 February suggest[ed] that net positioning in CDX IG and HY moderated in February from January’s record long, while Main and XO saw a further build-up in protection buying over the week.”
While inflows continue their six-week run for European IG funds, they slowed to US$660 million, up $9.4 billion YTD, but EU HY funds had net outflows, the first time in 2026 according to Morgan Stanley, indicating plateauing investor demand as the conflict continues.
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