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5 Feb 2015
QE in Europe to benefit demand for US credit – GS
FXStreet (Barcelona) - According to Goldman Sachs, the QE in Europe might benefit the demand for US credit because of attractive yields, with European credit spreads narrowing.
Key Quotes
“The European equity risk premium has more scope to decline and reflect narrowing credit spreads.
More risk appears to be discounted in equities than in credit. This is also indicated by derivatives
markets; implied equity volatility has increased, since mid-2014, despite credit spreads grinding
tighter in anticipation of, and after, the ECB’s QE. Equities look more attractive relative to corporate
debt.”
“European equities have performed well since the announcement of the ECB’s QE program on January 22, 2015.”
“After underperforming the S&P 500 for most of 2014, the STOXX Europe 600 has outperformed by close to 10% YTD.”
“While we remain positive on European equities, we are less optimistic for European credit returns.”
“The ECB QE announcement was, to a large extent, already reflected in European credit spreads and we think QE in Europe will drive more demand for US credit because of more attractive yields, better credit fundamentals and the stronger dollar.”
Key Quotes
“The European equity risk premium has more scope to decline and reflect narrowing credit spreads.
More risk appears to be discounted in equities than in credit. This is also indicated by derivatives
markets; implied equity volatility has increased, since mid-2014, despite credit spreads grinding
tighter in anticipation of, and after, the ECB’s QE. Equities look more attractive relative to corporate
debt.”
“European equities have performed well since the announcement of the ECB’s QE program on January 22, 2015.”
“After underperforming the S&P 500 for most of 2014, the STOXX Europe 600 has outperformed by close to 10% YTD.”
“While we remain positive on European equities, we are less optimistic for European credit returns.”
“The ECB QE announcement was, to a large extent, already reflected in European credit spreads and we think QE in Europe will drive more demand for US credit because of more attractive yields, better credit fundamentals and the stronger dollar.”