European credit: upping the quality

Against a backdrop of politically induced volatility in European credit markets and rich valuations, we continue to trade up to higher quality issuers.

The European Central Bank (ECB) delivered its first quarter-point cut to 3.75% in June, but it fell short of promising any further reductions for the time being. That may have been because of the accompanying hawkish upgrade in both growth and inflation forecasts for the remainder of 2024. The central bank stressed the need for data-based decisions and for a meeting-by-meeting approach, thus limiting any forward guidance, which investors were hoping for.