Deutsche Bank: Aftermath of Iran War may impact European credit bond market.

A strategist at Deutsche Bank said that European corporate bonds are likely to be impacted by the aftermath of the Iran war, and the spreads between investment grade bonds and junk bonds are expected to widen by the end of the year. The credit strategy team led by Steve Caprio is currently underweight on euro-denominated credit in global asset allocation, being more cautious compared to dollar-denominated credit. They noted that the aftermath of the Iran war is becoming more apparent. Stubborn inflation, rising shipping costs, potential shortages in storage chips affecting key cyclical industries, and ongoing tariff uncertainties are all negative factors, especially in Europe. The outlook for the market suggests that credit performance will show greater differentiation, and spreads will widen at least until the end of the year. The strategist forecasts that by the end of this year, the spread for euro-denominated investment grade bonds will widen by nearly 20 basis points to 95 basis points, and the spread for junk bonds is expected to widen by 77 basis points to 345 basis points. For dollar-denominated investment grade bonds, they predict a mild widening of spreads by 10 basis points to 82 basis points by the end of the year, and an increase of 39 basis points in junk bond spreads.