Important Information for Visitors

Privacy Policy    Disclaimer   Contact Us


© Copyright 2016 Topdown Charts Limited

Chart Of The Week: Eurozone Credit Risk

June 4, 2018

This week it's a look at credit risk pricing in the Eurozone. This is a chart I've been using a lot in recent months, of course as of the last week it's looking a bit more interesting now!  The reason why I've highlighted this chart in the past is that post-financial crisis, sovereign credit risk pricing did calm down, but to a new plateau.  In contrast, corporate credit risk pricing just got back to business down to pre-crisis lows.


The chart comes from a report on Eurozone equities, where I discussed the revised outlook based on changing signals from valuation, risk pricing, economic sentiment, and the earnings/macro backdrop.  I think this chart is certainly one of the key risk monitor charts investors should have on their radar.

Briefly, on the actual detail, the black line is European high yield credit spreads, and the blue line is the spread between the benchmark Eurozone 10-year government bond yield, and that of Germany.  For both indicators, I have taken the Z-Score in order to standardize them and put them on a comparable scale.


The reason I think this chart is so important, is firstly I would say that European high yield credit risk pricing is simply too complacent at these levels.  We know that obviously the ECB played a part here in that QE purchases of corporate bonds have artificially suppressed credit spreads.  But the key is the relative aspect (corporate credit looks too relaxed vs sovereign credit risk pricing).  And the final point to note, tactically speaking, is that flareups in these indicators can take some time to play through, so it's probably too soon to call the all clear on the current flareup.



Follow us on:



Please reload

Follow us for updates:
  • Twitter Social Icon
  • LinkedIn Social Icon
Search By Tags
Please reload

Important Notice

We offer exclusive insights for institutional clients with our suite of multi-asset investment research reports, personalized service, & global perspective.

Take a trial today...

Become a Client

Subscribe to the Top 5 Charts of the Week so you can get:

--Exclusive Charts

--Actionable Insights

--A Flow of New Ideas