Key Takeaways: European Leveraged Finance Conference 2026

Stephen Dulake (0:07)

Hello, everybody. My name is Stephen Dulake. I co-run Global Fundamental Research here at JPMorgan. I'm joined in London by my two colleagues, Gareth Davies and Daniel Lamy. Gareth, of course, runs European Credit Research and Strategy.

Daniel leads our European Credit Strategy effort. And on the screen in front of me, we have Tarek Hamid and Nelson Jantzen. Tarek leads our North American Credit Research and Strategy efforts, and Nelson sitting to the rights of Tarek, High Yield and Leveraged Loan Strategist.

What we wanted to do is to give you a perspective on the 10th Annual Leveraged Finance Conference, which we hosted here in London this past week.

By way of kicking off the discussion, I would say that first and foremost, we had a record number of presenting companies post-COVID. We had 92 companies presenting and or staging one-on-ones with investor clients.

In terms of investor engagement, that remained incredibly strong. For the fourth year in a row, we had over 1,000 clients attend the conference over the course of the two and a half days that we stage the event. In terms of themes, focus, and topics of discussion, not surprisingly the most predominately talked about theme was what was going on in bond markets, government bond markets in particular, given the rise that we've seen in long dated yields, and the extent to which that posed a threat or attracted people to the corporate asset class. In general, we remain of the view that falling yields remain pretty attractive for institutional investors. I think that was very much the default view within the room. But I also think that there's a lot of concern that absent, central banks tends to get inflation under control, you could see something of disorderly nature in bond markets. As you know, we've talked about this many times previously, as you know, when you have those periods of disruption or disorder, and yields move sharply higher very quickly, that tends to be associated with a spike in volatility, which results in higher rates and higher spreads. So spreads, rates, correlations going to one. So all in all, a big focus on yields and a big focus on the interplay between what's going on in bond markets and in credit markets. And I think a big subtext of that conversation was also to the extent that we are seeing a lot of AI-related funding across global credit markets, not just in the US, but these large hyperscalers tapping into credit markets elsewhere around the globe and this capacity available. The extent to which the demand for capital by hyperscalers is in some way detracting for the demand for government bonds. I'm not a huge buyer of that view necessarily. I think if there are impacts, they're largely second order in nature. But again, certainly, I think a large part of the conversation at the conference away from bond markets, the interaction between all in yields and corporate bonds and bond markets and between hyperscaler issuance and what that means in terms of the sort of interplay between bond markets or the demand on capital that we're seeing overall. I think the topics of discussion were very geopolitically focused, both from a fragmentation perspective. There were also sessions dedicated to the potential outcomes of the US midterm elections. And we also had a discussion of what the European Union might look like on a go-forward basis. So without further ado, I'd like to hand over to my colleagues now. So Daniel, you run Credit Strategy in Europe. You spoke very early on the event. What were your main takeaways from the High Yield Conference last week in London?

Daniel Lamy (4:43)

Yes. So talking to investors, most of them I spoke to were cautiously optimistic. In the near term, there are clearly some headwinds that you mentioned, high energy prices because of the war in the Middle East. That's putting pressure on central banks. We've taken a decisively hawkish turn in the last few weeks. That's pressured, as you mentioned, government bond markets, these things coming at a time when we typically have quite heavy supply just after Labor Day in the US. Added to that, the volatility that we've seen in the AI complex. However, when you step back, you mentioned all in yields, those are still fairly attractive. Euro high yields now north of 6 percent, closing on 6.5 percent. The duration of European leverage finance is also quite short. So the negative effects of higher government bond yields are actually much smaller than they are in other parts of global fixed income, which makes it relatively more insulated. Then on top of that, European credit has a much lower exposure to some of the areas of volatility like the AI complex.