Beyond spread: Why Europe’s growing high yield market is creating new opportunities

July 29, 2026

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Much has been made of historically tight spreads in European high yield, with some investors questioning whether the asset class still offers attractive opportunities. Yet a closer look at the resurgence in primary market activity suggests the opportunity set is broader than headline valuations imply, argue Erick Muller and Thomas Samson.

From contraction to expansion

Since Russia's invasion of Ukraine in February 2022, the European high yield market has been on a declining trajectory, from nearly €500bn in 2022 to €355bn by May 2025. This move was driven by several factors. Wide credit spreads after 2022 made floating-rate funding options, such as bank and leveraged loans, more attractive to issuers because of their refinancing flexibility, while a significant wave of rising stars shifted billions of euros of debt from high yield into investment grade between 2021 and 2024.

Meanwhile between 2022 and 2023, the asset class saw only modest inflows. Following record net issuance of €84bn in 2021, non-financial corporate net issuance was minimal in 2022 and 2023 before recovering from 2024 (Figure1).

Figure 1 – Issuance history

Source: JPMorgan, Final Score, European High Yield 2Q review, as of 2nd July 2026. Issuance excluding financials. For illustrative purposes only.

By 2025, credit spreads had returned to historic tights, prompting corporates to return to the bond market to lock in attractive credit premia. In parallel, the rise in all-in yields to between 5-6% fuelled persistent demand.

From a macroeconomic perspective, Europe’s economy has proved more resilient to energy price shocks and US tariffs than initially feared. Corporate earnings have also remained solid, providing a supportive backdrop for credit fundamentals. Business confidence has recovered, while investment has picked up.

Against this backdrop, new issuance increased significantly in 2025, with activity set to accelerate further in 2026. As a result, the European high yield market has expanded by around 15% from its 2025 lows and stood at more than €410bn at the end of June (Figure 2).

Figure 2 – Growth returns

Source: ICE Index Platform, as of 30th June 2026. Euro HY - * ICE BofA European Currency High Yield index (HE00). Global HY - ICE BofA Global High Yield Index (HW00). For illustrative purposes only.

This trend is not confined to the European high yield market. A similar pattern is evident in the US, where the high yield market grew by an average of 8% over the past two years.¹ Yet, the breadth and diversity of activity in Europe remains particularly notable.

A richer opportunity set

Despite an environment of historically tight spreads, we believe this year’s primary market activity shows a significantly broader opportunity set in value-added segments for active European high yield investors.

The opportunity set at a glance

The average duration of the European high yield market remains low at around 3 years but has increased by half a year from its early-2025 lows. This willingness of issuers to refinance at longer maturities has also helped ease investor concerns about a potential 2027– 2028 maturity wall.

Although the average spread to worst in 2026 has been around 280bps, nearly half of new issuance priced with a spread above 300bps.³ Similarly, while average yields have ranged between 5-6% over the past 2 years, 44% of 2026 new issues carried a coupon above 6%.³

Issuance has also been relatively well diversified across sectors. While telecoms and autos represented almost a third of new issuance, the other two thirds were well distributed. In addition, and in contrast with the US, the risk of hyperscaler indigestion does not impact the European market given the lack of issuers.

Fig. 4: YTD new issuance by spread to worst at issuance date

Source: JPMorgan Research, Final Score, European High Yield Q2 review, as of 2nd July 2026. For illustrative purposes only.

Fig. 4: YTD new issuance by coupon level at issuance date

Source: JPMorgan Research, Final Score, European High Yield Q2 review, as of 2nd July 2026. For illustrative purposes only.

The opportunity remains compelling

Looking ahead, we expect the search for yield to remain a key theme for the rest of the year. Supported by resilient corporate fundamentals and a healthy pipeline of new issuance, we believe the European high yield market is well placed to continue expanding its opportunity set. The combination of attractive all-in yields, a growing and increasingly diverse primary market and continued issuer discipline should provide fertile ground for active credit selection.

 

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of July 2026 and may change without notice.

References

1. ICE Index Platform, as of 30th June 2026. ICE BofA US Cash Pay High Yield Index (J0A0).
2. JPMorgan Research, Final Score, European High Yield Q2 review, 2 July 2026
3. ICE BofA Global Corporate Index (GI00), European currency component (EUR & GBP), as at end of June 2026.

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Index descriptions

H0A0 – The ICE BofA US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market.

GI00 – The ICE BofA Global Corporate & High Yield Index tracks the performance of investment grade and below investment grade corporate debt publicly issued in the major domestic and eurobond markets. Qualifying securities must be rated by either Moody’s, S&P or Fitch, have at least one year remaining term to final maturity, at least 18 months to maturity at point of issuance and a fixed coupon schedule.

HW00 - The ICE BofA Global High Yield Index tracks the performance of USD, CAD, GBP and EUR denominated below investment grade corporate debt publicly issued in the major domestic or eurobond markets. Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of USD 250 million, EUR 250 million, GBP 100 million, or CAD 100 million.

HE00 - The ICE BofA Euro High Yield Index tracks the performance of EUR dominated below investment grade corporate debt publicly issued in the euro domestic or eurobond markets. Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of EUR 250 million.

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