In previous publications we have already discussed the macro differences in the composition of the HY corporate bond universe denominated in dollars and in euros: as we have already noted, in particular, the European HY universe’s lower exposure to the energy sector and its higher average rating quality compared to the US asset class have made a crucial contribution to European speculative grade bond outperformance vs. their American counterparts in recent quarters. Put simply, the collapse of oil prices and the increase in risk aversion impacted the USD denominated asset class more significantly than the EUR denominated one. In this box, however, we further investigate the differences in composition and underlying trends between the two asset classes, with particular attention to the bottom up risks to which they are exposed.
We provide a more in-depth analysis in the comparison below
1) Latest and expected trends in default rates:
2) Distress ratios: among the drivers of future company failures
3) EUR vs US HY: two different “beasts”
Quality gap increases if the number of companies and not the value of the debt is considered