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2018/02/22 / Erste Group Research

Credit Markets Weekly | The Economy Remains Strong

After the sharp declines earlier this month, market volatility subsided noticeably last week. However, the recent strong market moves have illustrated that the issue of inflation risks, which market participants have obviously not been focused on for quite some time, has returned to the fore. In our opinion this suggests - depending on the data situation – that an extended period of heightened volatility could be in store.

The outlook for economic growth remains favorable. On February 21 initial flash estimates of sentiment in the manufacturing sector in February for the euro zone, Germany and France were released. As expected, manufacturing PMIs in the euro area weakened slightly in February, but remained positive overall, which points to continued strong growth momentum in industrial production. Based on these data, the medium term growth outlook clearly remains favorable. We continue to expect the euro zone to achieve stable GDP growth of +2.5% in 2018.

Both market volatility and the ongoing earnings season continue to weigh on EUR-denominated primary market supply. While momentum in the primary market for bank bonds picked up slightly in recent days, there was little activity in the corporate bond segment. Relative to other market segments, moves in credit spreads continue to be relatively stable overall. The long term trend toward tightening spreads remains intact.

Special topics of the week:
Fitch upgrades VB-Association to ‘BBB‘

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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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