Since mid-December, European investment-grade credit spreads have been increasingly pricing in a US recession, and according to our macroeconomic model, current spreads are almost fully priced for a mild recession (see chart). However, our analysis shows that the European credit market is not pricing in a deep recession a la 1980s or 1990s.
Our quarterly macroeconomic model for MAGGIE high-grade industrial spreads introduced in our 2008 credit market outlook uses the US unemployment rate,
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