Focus on global credit amid rising volatility in Euro credit markets

ON BONDS

PIMCO's Luke Spajic says corporate credit investors will have to increasingly look further afield for interesting opportunities.

The European sovereign debt crisis is having a direct and indirect impact on European credit quality. We have seen a rise in corporate credit default risk premia as eurozone member states struggle to coordinate an effective response to the European sovereign debt crisis. For corporates in stressed sovereigns, there is a risk capital markets will close altogether. Corporate credits may suffer latent distress if governments raise taxes, change regulations and consumption levels drop due to wealth shrinkage. In a worst-case scenario, corporate debt holders may be forced to accept haircuts o...