The Insight by Oaktree Capital Keeping Composed
Jul 10, 2025
Madelaine Jones, a Portfolio Manager for European High Yield Bonds, joins Justin Quaglia, a Credit Trader focused on high-yield bonds, and Christopher Gray, a Managing Director in Asset-Backed Finance at Oaktree. They discuss the recent volatility in credit markets, exploring the psychological impacts on investors. The group analyzes the dynamics of leveraged credit and the impact of regulatory changes on trading. Finally, they delve into opportunities in asset-backed finance amidst a shifting economic landscape, emphasizing the importance of strong investment relationships.
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Europe’s Stable Credit Market Appeal
- Europe’s credit markets are large, high-quality, and diversified despite lacking US-style equity superstars.
- Credit investors value stable companies that reliably pay coupons and offer contractual returns.
CLOs and Direct Lending in Europe
- CLOs dominate European loan markets, composing about 70% of primary buyers, providing stable, locked-up investor bases.
- Direct lending in Europe fills gaps left by banks, focusing on medium and smaller-sized companies.
Europe’s Supportive Fiscal Shift
- Germany's loosening of fiscal constraints and increased spending signals broad supportive stimulus across Europe's economy.
- European companies have been conservative recently, improving balance sheets with lower leverage and more cash holdings.