European Senior Fixed-Income Investor Survey 1Q14

Fitch Ratings-London-17 February 2014: Results from Fitch Ratings' 1Q14 European fixed income investor survey show that investors are more bullish on eurozone fundamentals. Only around one-third are concerned about a prolonged recession derailing credit markets - the lowest reading in almost three years. Only one-quarter said fundamentals would worsen for developed market sovereigns, down sharply since October. Nevertheless, deflation concerns have risen to their highest level since 2010.
Survey respondents also feel that monetary tightening will be well-managed. A large majority (78%) of investors believe central banks will raise rates in a smooth and timely manner, without threatening economic recovery. This is despite the volatility induced in emerging markets (EMs) by the Fed's tapering. The level of confidence in central bank action has increased from the already high level in our July survey.
Investor anxiety over EMs applies to sovereigns and corporates alike. Around 60% of those polled believe fundamental credit conditions will deteriorate for both segments. In addition, EM corporates is seen as the sector facing the greatest refinancing challenge over the next 12 months by the largest number of respondents.
By contrast, the high-yield sector is the subject of the most bullish issuance outlook and the second most optimistic expectations on spread tightening. Respondents again voted high-yield their favourite marginal investment choice, continuing its unchallenged preferred status since early 2013. However, a rising share of respondents regard the asset class as overvalued.
Fitch's 1Q14 survey was conducted from 8 to 31 January. It represents the views of managers of an estimated EUR5.9trn of fixed-income assets.
The full survey is available on www.fitchratings.com