Euro High-Yield Newsletter – 1Q26

Euro High-Yield markets weakened in 1Q26, with the index declining 1.5%, as the asset class entered the quarter with limited valuation support following the aggressive spread compression seen through 2024–2025. Escalating Middle East geopolitical tensions and resulting energy price volatility pushed inflation expectations higher and reinforced the ECB’s cautious policy stance, reducing confidence around the pace of future rate cuts and tightening financial conditions across speculative-grade credit. Despite the weaker market backdrop, issuance activity in 1Q26 remained largely refinancing-driven, with Financials and Communications continuing to dominate issuance activity as issuers opportunistically extended maturities and strengthened liquidity profiles.