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2019/10/17 / Erste Group Research

Credit Markets Weekly | Brexit Talks in the Spotlight

Spreads in the corporate bond segment have tightened since the end of last week. The move was triggered by President Trump's announcement of a partial agreement in the US-China trade dispute and reports about a convergence of views in the talks between the EU and Great Britain. On Tuesday both British and EU representatives saw a chance that a new Brexit deal could be agreed on at the EU Council summit on 17/18 October. However, with its willingness to negotiate, the EU in particular probably also wants to avoid giving the impression that it is to blame for a hard Brexit. In any case, until Thursday morning no breakthrough in negotiations was achieved.

The few companies (around 5% of the Stoxx 600) that reported so far delivered mildly positive revenue and earnings surprises. In the short term the beginning earnings season will be overshadowed by the outcome of the EU summit and progress in the US-China trade talks.

In view of the heightened uncertainty surrounding the trade war and Brexit as well as the deteriorating economic outlook, we recommend investment in the BB-rated and IG hybrid segments.

Special topics of the week:
- Issuer in focus: Banca Popolare dell’Alto Adige S.p.A.

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General information

AuthorErste Group Research
Product nameCredit News
Topic in focusCredits/ Corporate bonds
Economy in focusAustria, Eurozone
Currency in focusEuro
Sector in focus-


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