Comment | Fixed Income
While European financials bonds are trading at attractive levels (at historical wides), we expect macro sentiment and “technicals” to continue to impact valuations.
European financials bonds are not just appealing for absolute return funds, but as the large (up to 48%) and cheapest part of the cash IG (Investment Grade) bond index, they represent a significant weight in real money managers’ portfolios and in benchmark-related funds as well.
We would highlight that the capital structure of European financials is more complex than corporates’ and offers interesting investment opportunities.
The bond characteristics, language and regulatory capital credit are also key when analyzing the financials bond space. Insurance in particular is viewed as a “black box”, so we hope to provide some insight on how to think about insurance vs. bank bonds.