Emerging bonds

For the seventh episode of Transitions, we explored the mounting role of ESG data in shaping financial analysis and guiding investment strategy, with Sophie Palagos, Credit & Sustainability Analyst and Marc Estagnasié, ESG strategist, Cross-functional projects & Data.

Each month we share the conclusions from the monthly strategy investment committee which provides a summary of Ostrum AM's views on the economy, strategy and markets.

European banks have reported robust 2025 earnings. European bank bonds have been strongly supported by these solid fundamentals and favorable technical factors, leading to a significant compression of spreads, especially on subordinated debt.We believe the current fundamental momentum will carry through into 2026. We anticipate net interest income growth potential from the second half of the year, once the central bank rate cuts implemented in 2025 have been largely absorbed by banks.Consequently, we retain a positive outlook for the banking sector. We believe banks are favorably positioned within an economic landscape marked by, on one hand, a relatively stable macroeconomic baseline scenario, and on the other, an environment replete with numerous underlying risks.Furthermore, despite stretched valuations and a riskier context, the decline in issuance and the sector's resilience should limit downside risk and support carry. Opportunities remain through mergers and acquisitions, regulation (AT1), and lower capital structure investments.