Europe

Last week marked a milestone for the structured finance industry with a record 6,003 market participants gathered in Barcelona for the 30th Global Asset-Backed Securities (ABS) conference.

Yesterday, the European Central Bank (ECB) delivered a widely expected 25 basis point (bp) rate hike. becoming the first major central bank in developed markets to have raised rates in response to the Iran conflict.

The Italian banking sector has kicked off the week with news of a potentially blockbuster merger, showing the theme of mergers and acquisitions (M&A) in European banking is very much alive.

In 2026, we are at a crucial juncture for European CLO managers. The 2021 and 2022 vintages are reaching the end of their reinvestment period. Understanding why this is significant is vital to grasping the current state of the CLO markets.

Persistent macroeconomic volatility, geopolitical tensions and AI-driven disruption have all shaped the start of 2026. It has also marked the return of the leveraged buyout (LBO).

European bank results for the first quarter of 2026 have revealed a strong start to the year, allaying some of the concern that the prolonged conflict in the Middle East might impact bank fundamentals to some extent.

Credit markets have been remarkably resilient in the face of significant geopolitical and macroeconomic volatility in recent weeks.

Since their introduction in 2013, AT1 bonds have acted as a valuable kicker for many fixed income funds, having consistently delivered excess return over more mainstream credit markets such as high yield bonds over the medium term.

Last week, European regulators took another step in their long journey towards a single European banking regime, otherwise known as “banking union”.

Corporate hybrid issuance is on track for a record year in both Europe and the US, driven by expanding supply well beyond the traditional utilities, energy, and telecoms issuers.

Collateralised Loan Obligation (CLO) markets have repriced meaningfully over the past few weeks, with a sell-off in software-related loans leading to even more spread “tiering” as investors differentiate between managers with lower exposure to stressed sectors and those carrying more tail risk.

With most European banks having now reported their full-year 2025 results, we see the sector carrying solid momentum into 2026.