B-rated bonds are sweet spot in euro high yield

Mike Della Vedova, manager of the T. Rowe Price European High Yield Bond fund, analyses the asset classes to choose from when investing in a challenging fixed income cycle.

The European high yield market has seen rapid growth in recent years – it has quadrupled in size since 2007, and is today worth some €400bn (see chart). The growth is based on a structural change in how Europe is financing its corporates.  For example, banks have been less willing to lend to European corporates since the financial crisis, and more lending restraint is expected this year as the European Central Bank embarks on its asset quality review and stress tests. This is leading to a faster pace in the trend of financial disintermediation, where companies are sourcing their finan...