HSBC On European Credit: Night Vision Required

European corporate hybrids are set to face volatility during 1H2017, as the Australian construction materials firm Wienerberger may not call its euro-denominated 6.5% hybrid on the first call date, while RWE is likely to call its CHF-denominated hybrid on its first call date. HSBC analysts, led by Michael Ridley, said in their November research titled “Night Vision Required - European Corporate Credit Outlook 2017” that they believe Trump’s victory has enhanced the likelihood of a rising U.S. dollar.

QE-masked credit market risks

Ridley and colleagues argue that following the entry of the ECB and BoE as corporate bond buyers in 2016, there has been an indiscriminate tightening of credit spreads. They believe the entry of the ECB and BoE has thrown...