ABN Amro upbeat on European corporates

Dutch bank ABN Amro has bucked the bearish predictions for European corporate credit next year, predicting that despite unattractive economic prospects, excess liquidity and scarcity of corporate issuance will keep market risk low.

European spreads seem unattractive because corporate credit is at an inflexion point, according to head of credit strategy Alison Miller. Default rates have been falling consistently since January 2002, but have now reached a stabilisation point where they cannot fall much further. The bank agrees with rating agency Moody’s prediction that the default rate will remain around 2% during 2005.