Soaring credit risk may be the canary in the coal mine for European assets

Bloomberg/Giulia Morpurgo/2-9-2022

“Surging risk in the European credit market is signaling tough times ahead, clashing with a calmer scene in equities. Measures of risk have soared for both investment-grade and high-yield borrowers after the European Central Bank’s unexpectedly hawkish tilt last week, even as a gauge of euro-area stock volatility has stayed below earlier peaks.”

USAGOLD note: U.S. bond market woes echo in Europe, as the chart below shows. While the supply of bonds increases, driving up yields, the demand for gold increases alongside. The world needs a safe haven, and if bonds no longer fit the bill, capital is likely to migrate in gold’s direction.

Chart courtesy of TradingEconomics.com