Initial tariff agreements support credit spreads

Credit Markets Weekly , 14. Mai
The mood on the financial markets brightened further last week. Following the announcement of a trade agreement between the US and the UK at the beginning of May, an agreement was reached in Switzerland last weekend in the tariff dispute between the US and China.

Stock market volatility in Europe recovered completely from the initial tariff shock, as did synthetic CDS indices. All rating categories in the EUR Non-financial corporate bond segments also benefited from the positive market sentiment. The High Yield segment recorded the strongest spread tightening over the past seven days, at around -40bps. This offset the significant widening associated with US tariff policy. However, HY spreads are generally around +15bps above their levels at the beginning of the year.

On the economic front, the significant improvement in the Eurozone ZEW index was positive. The reporting season in Europe is also going well. Some companies lowered their forecasts for 2025 as a result of the tariff conflict. The high level of uncertainty is currently reflected in the upcoming second-quarter earnings, which are expected to be slightly negative from today's perspective. Stoxx600 total earnings are not expected to rise again until the third quarter of 2025.

Special topics of the week:

- Issuer in focus: CEZ Group