Euro Credit Risk Eases on Stronger Economic Data and Improved Sentiment

Investor sentiment in euro credit markets improved at the end of the week, leading to a slight decline in the cost of insuring high-yield debt against default

The iTraxx Europe Crossover index, which tracks credit default swaps (CDS) on sub-investment grade euro-denominated bonds, fell by 1 basis point to 302 basis points, according to data from S&P Global Market Intelligence.

The move reflects growing market confidence fueled by stronger-than-expected macroeconomic data across major economies. On Thursday, U.S. purchasing managers’ index (PMI) readings came in above forecasts, indicating resilience in the American economy. That was followed on Friday by encouraging U.K. retail sales figures and a positive surprise in German GDP data.

These data releases collectively eased concerns over global economic stability and credit risk, particularly in the high-yield segment. The modest decline in CDS spreads signals a lower perceived risk of default among riskier European borrowers, at least in the short term.

Analysts note that while the overall decline in the iTraxx index was small, it underscores how sensitive credit markets remain to macroeconomic signals, especially amid ongoing uncertainty around inflation, interest rates, and geopolitical tensions.

Investors will continue to monitor upcoming economic reports and central bank guidance for further cues on market direction and credit conditions.