July 2, 2025 – European junk bond issuance soared to a record €22.5 billion ($26.6 billion) in June, surpassing the previous high from June 2021 by nearly €4 billion, as companies capitalized on lower borrowing costs and investors shifted away from US markets. The surge, reported by Bloomberg, was driven by attractive yields and relative stability in Europe’s high-yield market, with 44 deals marking the highest monthly deal count on record, according to PitchBook.

Investors are reducing US exposure due to fears of economic slowdown sparked by President Donald Trump’s tariff policies, which have widened US junk bond spreads to a 17-month high of 401 basis points. In contrast, European junk bond spreads are tightening, bolstered by fiscal optimism and a robust investor appetite. A notable deal included KKR Inc.-backed Flora Food Group BV’s Triple C-rated bond, the first in nearly a year, signaling confidence in riskier assets.

“The market is drowning in new deals,” an investor at a European credit hedge fund told Reuters, highlighting the frenzy fueled by falling borrowing costs. Companies like Telecom Italia and Air France SA-KLM also tapped the market, with the latter issuing a €1 billion sustainability-linked bond. This activity follows a strong Q1 2024, where European high-yield refinancing hit $24.1 billion, per Fitch Ratings.

However, risks loom. Analysts warn that a potential US trade war or European economic slowdown could widen spreads, with Deutsche Bank predicting US junk bond spreads could hit 860 basis points by year-end. For now, Europe’s junk bond market remains a haven for yield-seeking investors.