Euro IG: Finding Opportunities to Go Up in Quality
Mary Pollock, CFA - Head of Real Estate, CreditSights
Maryum Ali, CFA - Senior Analyst, Consumer Goods, CreditSights
Eric Axon, CFA - Co-Head of High Yield, Head of Healthcare, CreditSights
Wen Li, CFA - Head of Metals & Mining, CreditSights
Andrew Belton - Head of Basics and Infrastructure, CreditSights
Mihir Trivedi - Analyst, Construction / Infrastructure, CreditSights
Andrew Moulder - Head of Utilities, CreditSights
Mark Chapman, CFA - Head of Telecom/Media, Product Strategist, CreditSights
Jim Williamson - Senior Analyst, Autos, CreditSights
Nick Moglia, CFA - Senior Analyst, REITs, Utilities and Refiners, CreditSights
2 October 2025
Insights into Euro IG’s quality-driven rotation, sector-level RV, issuer fundamentals, and structure implications, including:
Market and allocation shift: See how 2025’s spread compression and analyst-led focus on higher-quality Euro IG reshaped portfolio positioning, sector selection, and carry, bolstering defensiveness and execution without detailing bond-by-bond outcomes.
Spread-risk signals: Understand which ratings tiers and subordinated layers appear most at risk as pick-ups narrow, and the factors that typically drive timing for moving up-in-quality, including macro backdrop, sector mix, and agency rating dynamics.
Peer-quality landscape: Find out which names are most exposed at a high level and how exposure varies by sector fundamentals, hybrid concentration, index composition, and relative-value skews.
Counterparty actions and signals: Gauge what rotations by benchmark-heavy issuers and investor flows—across Utilities, Telecom, Autos, and Real Estate—and index-level adjustments may indicate for spread leadership, sector share shifts, and timelines.
Financing watchpoints: Identify what to monitor in seniors vs subs, hybrid supply cadence, single-name RV switches, CoreScore classifications, and planned portfolio upgrades, without pre-judging spread recoveries or deal terms.
Executive Summary
Euro IG up-in-quality opportunities are increasing as spreads compress across ratings tiers. Many investors still have cash to deploy. We highlight ideas where single-name credit strength supports tight spreads.
For senior bonds, the Euro IG Index shows only a small spread step between tiers. Levels sit near recent tights and well below 2019–present averages. When including subordinated bonds, the BBB3 vs BBB2 gap is the standout, yet it remains slimmer than typical past differentials.
We present defensive, relative-value switch ideas across well-known issuers, with a higher-quality tilt. We also shift one name to Market perform as it now trades broadly in line with larger, lower-levered peers.
For each idea, we set out the RV case and a brief fundamentals snapshot. We also include agency ratings and CreditSights’ CoreScores. CoreScores group credits as Core, Strategic, Moderate Risk, or Speculative to aid buy-and-hold decisions.
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