European Credit Markets Show Resilience in H1 2026 Despite Economic Headwinds

European credit markets proved surprisingly robust during the first half of 2026, maintaining stability even as inflation and geopolitical tensions created significant challenges. The European Central Bank raised interest rates by 25 basis points to 2.25% in June in response to euro area inflation reaching 3.2%, while economic growth forecasts slowed to just 0.5% annually, signaling an uncertain outlook for the remainder of the year.

The credit market experienced sharp volatility in early spring, with risk premiums widening substantially on geopolitical concerns. Investment Grade spreads peaked at 98 basis points and High Yield spreads reached 333 basis points. However, the market staged a rapid recovery by late May and June, with Investment Grade spreads tightening to 80 basis points and High Yield spreads settling near historical lows of approximately 269 basis points. This recovery reflected investor confidence in corporate balance sheets and attractive yield opportunities despite macroeconomic uncertainties.

Record Supply Absorption

The market successfully absorbed unprecedented levels of new issuance. The Bloomberg Euro High Yield Index saw notional outstanding increase by EUR 27 billion in the first half, while the Bloomberg Euro Corporate Aggregate Index rose by EUR 100 billion. This substantial supply influx was readily absorbed due to strong institutional cash positions and renewed retail fund inflows, providing robust technical support for market stability.

Eurex Futures Performance

Eurex Credit Index Futures contracts traded approximately 700,000 times during the first half, representing EUR 55 billion in notional value. Since inception, over 3 million contracts totaling EUR 248 billion have been traded. Open Interest peaked above 60,000 contracts in May, exceeding EUR 5 billion in notional value.

Euro Investment Grade Futures averaged daily volume of 1,375 contracts, equivalent to EUR 238 million in notional trading, with a significant spike to 3,151 contracts in March during heightened volatility. These instruments proved essential for institutional investors managing portfolio risk during periods of acute market stress.

Euro High Yield Futures demonstrated growing momentum, with average daily volume increasing from 1,534 contracts in the first quarter to 1,689 contracts by the end of the second quarter. USD Emerging Market Sovereign Futures averaged 1,562 contracts daily, spiking to 3,290 contracts in March as rising US Treasury yields and dollar strength pressured emerging market financing conditions.

Block Trading Surge

Block trading activity experienced explosive growth, with the first quarter registering 552 trades representing a 157.9% increase year-over-year. The second quarter saw 576 block trades, up 167.9% from the prior year. Transaction sizes remained substantial, averaging EUR 25.57 million per block in the first quarter, with total notional traded reaching EUR 14.33 billion in the second quarter. This activity underscored significant institutional engagement in credit markets despite economic uncertainty.