Challenges Facing Europe's Riskiest High-Yield Bonds
According to a recent report by Goldman Sachs Group Inc., the riskiest segment of Europe's high-yield corporate bond market is navigating a perilous path as refinancing challenges loom large. As reported by Bloomberg, over 30% of the notional amount of Europe's lowest-rated bonds is set to mature between now and the end of 2026, with refinancing costs remaining prohibitively high. Goldman Sachs credit strategists, including Lotfi Karoui and Spencer Rogers, warn that this scenario may lead to an increase in defaults over the next year.
The strategists highlight that CCC-rated issuers within the EUR market face significant refinancing issues. Current yields for CCC debt are more than double recent weighted-average coupon rates. Unless there is a significant improvement in credit spreads in this market, similar to what occurred in the USD market during the latter half of 2024, the issuer-weighted default rate is anticipated to rise within the next year.
In contrast, the U.S. junk bond market presents a different story. Despite potential challenges, the incremental cost of refinancing debt due over the next three years is deemed "largely manageable" with the expectation of moderate earnings growth. According to the strategists, a noticeable increase in the default cycle in the USD high-yield market would only occur with a substantial GDP growth slowdown or an outright recession, neither of which is currently anticipated by Goldman.
While Europe faces hurdles within its CCC-rated bonds, other segments like BB and single B ratings appear to have a more manageable path forward. However, January's issuance of junk bonds in both the U.S. and European markets has lagged behind historical averages, with U.S. firms pricing $14 billion and European firms pricing EUR6 billion ($6.23 billion), as cited by Goldman.
The relatively low issuance numbers have contributed to a strengthening of the secondary market. In the U.S., the average yield on CCC-rated bonds fell by 40 basis points to 9.76% this month, marking the most significant monthly drop since November. Conversely, a Bloomberg gauge shows the yield on CCC euro and sterling-denominated debt remaining above 13%. The experts from Goldman underscore that the weaker-than-average primary market activity in high-yield bonds does not indicate weak investor demand. Instead, it reflects the greater sensitivity of high-yield issuers to funding costs, which necessitates strategic timing for issuance.
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1. INTRODUCTION
Making Data-Driven Decisions to Grow Your Business
- REPORT DESCRIPTION
- RESEARCH METHODOLOGY AND AI PLATFORM
- DATA-DRIVEN DECISIONS FOR YOUR BUSINESS
- GLOSSARY AND SPECIFIC TERMS
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2. EXECUTIVE SUMMARY
A Quick Overview of Market Performance
- KEY FINDINGS
- MARKET TRENDS This Chapter is Available Only for the Professional Edition PRO
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3. MARKET OVERVIEW
Understanding the Current State of The Market and Its Prospects
- MARKET SIZE
- CONSUMPTION BY COUNTRY
- MARKET FORECAST TO 2030
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4. MOST PROMISING PRODUCT
Finding New Products to Diversify Your Business
This Chapter is Available Only for the Professional Edition PRO- TOP PRODUCTS TO DIVERSIFY YOUR BUSINESS
- BEST-SELLING PRODUCTS
- MOST CONSUMED PRODUCT
- MOST TRADED PRODUCT
- MOST PROFITABLE PRODUCT FOR EXPORT
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5. MOST PROMISING SUPPLYING COUNTRIES
Choosing the Best Countries to Establish Your Sustainable Supply Chain
This Chapter is Available Only for the Professional Edition PRO- TOP COUNTRIES TO SOURCE YOUR PRODUCT
- TOP PRODUCING COUNTRIES
- TOP EXPORTING COUNTRIES
- LOW-COST EXPORTING COUNTRIES
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6. MOST PROMISING OVERSEAS MARKETS
Choosing the Best Countries to Boost Your Exports
This Chapter is Available Only for the Professional Edition PRO- TOP OVERSEAS MARKETS FOR EXPORTING YOUR PRODUCT
- TOP CONSUMING MARKETS
- UNSATURATED MARKETS
- TOP IMPORTING MARKETS
- MOST PROFITABLE MARKETS
7. GLOBAL PRODUCTION
The Latest Trends and Insights into The Industry
- PRODUCTION VOLUME AND VALUE
- PRODUCTION BY COUNTRY
8. GLOBAL IMPORTS
The Largest Importers on The Market and How They Succeed
- IMPORTS FROM 2012–2024
- IMPORTS BY COUNTRY
- IMPORT PRICES BY COUNTRY
9. GLOBAL EXPORTS
The Largest Exporters on The Market and How They Succeed
- EXPORTS FROM 2012–2024
- EXPORTS BY COUNTRY
- EXPORT PRICES BY COUNTRY
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10. PROFILES OF MAJOR PRODUCERS
The Largest Producers on The Market and Their Profiles
This Chapter is Available Only for the Professional Edition PRO -
11. COUNTRY PROFILES
The Largest Markets And Their Profiles
This Chapter is Available Only for the Professional Edition PRO- United States
- China
- Japan
- Germany
- United Kingdom
- France
- Brazil
- Italy
- Russian Federation
- India
- Canada
- Australia
- Republic of Korea
- Spain
- Mexico
- Indonesia
- Netherlands
- Turkey
- Saudi Arabia
- Switzerland
- Sweden
- Nigeria
- Poland
- Belgium
- Argentina
- Norway
- Austria
- Thailand
- United Arab Emirates
- Colombia
- Denmark
- South Africa
- Malaysia
- Israel
- Singapore
- Egypt
- Philippines
- Finland
- Chile
- Ireland
- Pakistan
- Greece
- Portugal
- Kazakhstan
- Algeria
- Czech Republic
- Qatar
- Peru
- Romania
- Vietnam
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LIST OF TABLES
- Key Findings In 2024
- Market Volume, In Physical Terms, 2012–2024
- Market Value, 2012–2024
- Per Capita Consumption, By Country, 2018–2024
- Production, In Physical Terms, By Country, 2012–2024
- Imports, In Physical Terms, By Country, 2012–2024
- Imports, In Value Terms, By Country, 2012–2024
- Import Prices, By Country Of Destination, 2012–2024
- Exports, In Physical Terms, By Country, 2012–2024
- Exports, In Value Terms, By Country, 2012–2024
- Export Prices, By Country Of Origin, 2012–2024
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LIST OF FIGURES
- Market Volume, In Physical Terms, 2012–2024
- Market Value, 2012–2024
- Consumption, By Country, 2024
- Market Volume Forecast to 2030
- Market Value Forecast to 2030
- Products: Market Size And Growth, By Type
- Products: Average Per Capita Consumption, By Type
- Products: Exports And Growth, By Type
- Products: Export Prices And Growth, By Type
- Production Volume And Growth
- Exports And Growth
- Export Prices And Growth
- Market Size And Growth
- Per Capita Consumption
- Imports And Growth
- Import Prices
- Production, In Physical Terms, 2012–2024
- Production, In Value Terms, 2012–2024
- Production, By Country, 2024
- Production, In Physical Terms, By Country, 2012–2024
- Imports, In Physical Terms, 2012–2024
- Imports, In Value Terms, 2012–2024
- Imports, In Physical Terms, By Country, 2024
- Imports, In Physical Terms, By Country, 2012–2024
- Imports, In Value Terms, By Country, 2012–2024
- Import Prices, By Country, 2012–2024
- Exports, In Physical Terms, 2012–2024
- Exports, In Value Terms, 2012–2024
- Exports, In Physical Terms, By Country, 2024
- Exports, In Physical Terms, By Country, 2012–2024
- Exports, In Value Terms, By Country, 2012–2024
- Export Prices, 2012–2024