Relief rather than rally. US$ credits further at risk vs € ones

Credit markets have rallied on 15 th March after the US president confirmed he was considering some exemptions on Autos and Auto parts tariffs, which followed the 90-day pause decided on 9 April on reciprocal tariffs. Therefore, AT1 spreads have rallied by 25bp vs swap last week, followed by the iTraxx X-Over and €HY cash spreads (-24 and -18bp respectively). Non-financials (-9bp for the iBoxx senior index) have once again outperformed banks (-6bp), partly on the back of mitigated results published by US banks so far (disappointing Q1-25 earnings by Wells Fargo and many regional banks). Is it time to play a recovery on the back of tariff u-turn? Much too early in our opinion, although Auto parts could continue to tighten technically as i/ they are not significantly exposed yet to trade tariffs (3 May has not entered into effect yet), ii/ the spread-widening was brutal in the sector (until last week). But more generally, the underperformance if not the scissor’s effect observed between US$ HY and € HY spreads (see chart on next page), as well as between the CDX NA IG and the iTraxx Main indices (see chart s on next page) should warn investors against moving bullish too soon. Indeed, this is another sign of a growing distrust towards US$ assets, which might increase further as US president D. Trump is adding some pressure on Fed’s bo s s J. Powell to cut interest rates . Against this backdrop, keeping a long € vs $ credit position looks appropriate, while we maintain our preference for low beta credits vs High Beta ones .