European stocks rose to a six-month high this week as the Federal Reserve announced another round of bond purchases to boost the economy, offsetting renewed concern that some European countries won’t be able to repay their debts.
Junk bonds are rallying for a seventh week, the longest streak since January, amid confidence that European central banks will maintain stimulus measures even as the economy emerges from recession.
The worst may be yet to come in the global financial crisis as the central bank spending that kept defaults low runs out, according to Deutsche Bank AG.
Borrowing costs for companies fell to a record in Europe as policy makers prepare more stimulus measures to prevent stagnant prices from derailing the economic recovery.
The cost of insuring European corporate bonds is heading for its third weekly increase as yields surge amid concern central banks will curb their efforts to boost economic growth.
Tesco Plc, the U.K.’s biggest grocer, and AT&T Inc., the largest U.S. telephone company, are selling bonds in euros as borrowing costs approach the lowest in 4 1/2 months in Europe.
Spain led a surge in the cost of insuring European government debt to a record on concern the region’s peripheral nations will struggle to cut budget deficits and repay debt.
A benchmark indicator of corporate credit risk in the U.S. fell to the lowest level in more than two months as 84 of 91 European Union banks passed stress tests.
"Fundamentals are still broadly supportive of corporate defaults remaining low."
- Nick Burns on Sep 30, 2014