Br euro hy beyondtheyield

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Beyond the yield The strategic role of euro high yield

A primer comparing euro high yield and Ratings allocation - Europe vs. US vs. Asia Sector allocation and effect on default environment – default cycle (%)4 other credit segments HY MV% by rating The European HY market has more of a tilt towards less cyclical sectors, which has created a long-term, lower default As credit portfolios expand beyond traditional public (EUR HY¹ vs Asia HY² and US HY³) environment vs. other HY markets. markets, investors are becoming more deliberate in how they allocate risk. In this context, euro high yield (EUR HY) has evolved from a satellite exposure into a core allocation, The European HY market is higher rated compared to 12% valued for its ability to deliver income while preserving the US and Asia HY market. liquidity and transparency. Its growing relevance reflects a more nuanced understanding of how it differs from other 9% credit segments, including global high yield, leveraged loans 70% and private credit. Together, these highlight EUR HY’s role as a complementary and increasingly strategic building 60% 6% block within diversified portfolios.

50% 3% Euro high yield and global high yield Euro high yield differs meaningfully from its global 40% 0% counterpart, which is broader and dominated by USD- denominated US issuers (just under 60% as at 31 July 2026), 30% with greater exposure to cyclical sectors and lower-rated EUR High Yield 12 months trailing defaults rate credits. EUR HY is structurally higher quality, with a bias 20% US High Yield 12 months trailing defaults rate towards BB-rated issuers, which has contributed to lower default rates historically. This quality tilt is reinforced by lower sensitivity to interest rate volatility; shorter effective duration, 4 S&P as of July 2026 10% Please note that past performance is not a guide to the future. driven by call-heavy structures, has historically dampened price sensitivity to sharp rate moves. Currency also plays a key role. For EUR-based investors, EUR HY avoids the cost of 0% hedging USD exposure, while USD investors may benefit from Euro high yield and leveraged loans efficient price discovery and generally tighter bid–offer EUR HY US HY Asia HY cross-currency dynamics (as of July 2026 1.4% pick up). spreads, offering relatively stronger liquidity even in stressed Sector composition further differentiates the asset class, with markets and making them well suited for tactical allocation. EUR HY having lower exposure to energy in favor of BB The distinction between EUR high yield and leveraged loans is In contrast, loans, given their over the counter structure, tend telecommunications and non-cyclical sectors, resulting in B primarily driven by differences in rate sensitivity, market to trade less frequently and involve longer settlement lower index‑level cyclicality. These advantages are offset by a structure and return dynamics. In falling-rate environment processes, although ongoing improvements in market smaller market size – approximately a fifth of global high yield CCC and below EUR HY offers greater upside through duration and spread infrastructure continue to support liquidity and transparency – which can limit idiosyncratic alpha opportunities. Yields are compression while loans provide a more defensive profile. over time. EUR HY offers broader and generally higher-quality also typically lower, and performance may lag in strong risk- 1 ICE BofA Eur High Yield Constrained index, as of July 2026 The floating-rate structure of loans limits duration risk, with exposure, while loans tend to have greater exposure to on environments. EUR HY is well suited to investors 2 JACI Non-Investment Grade Index, as of July 2026 returns primarily driven by carry as well as spreads, while leveraged, often sponsor-backed issuers. That said, loans prioritizing quality, stability and income. 3 ICE BofA US Cash Pay High Yield Constrained index, as of July 2026 prices tend…