Meanwhile, the amount of distressed debt is small and is concentrated in the low single B/CCC part of the market, so we don’t expect it to become a systemic concern. For the euro high-yield market overall, we expect defaults to stay low at 3% for 2025.
Euro High-Yield Can Help Diversify US Exposure
While the US high-yield market offers investors the widest range of opportunities, euro high yield represents a smaller but complementary market that’s less mature, less efficient and more varied. For instance, it has a higher credit rating than its US counterpart (BB- vs B+), lower defaults (1.2% versus 2.8%, as of June 30, 2024) and a more defensive sector composition, making it an effective diversifier, in our view.
Given the strong return potential across both markets, we believe investors shouldn’t be deterred by worries that may prove overplayed.
