With the winter break fast approaching, this Hebdo Crédit will probably be the last of the year, unless something unusual occurs between Christmas and New Year's Day. This is rare, but it has happened from time to time, notably at the end of the 2010s with a resounding default, but my memory is failing me... Default... a dreaded word for bond investors, and perhaps that is why we have forgotten what it was all about, and why even the Hebdo Crédit that once reported on it has itself vanished, hidden away in the limbo of forgotten bonds…But why so much emphasis and melancholy in a weekly newsletter on the credit markets, you may ask?

Because although this Hebdo Crédit Octo will probably be the last of this bond year 2025, which can be summed up as a smooth carry despite a brief scare in April – Good old Mr. Trump…– it will also be the last one I will write after more than twelve years of loyalty to this Friday morning appointment and more than 450 editions...

On February 18, 2013, the first Hebdo Crédit was published... The Cypriot crisis was looming, leading a few months later to the seizure of depositors' assets. Peugeot announced a loss of €5 billion, but no one was concerned because the government guaranteed all of its banking subsidiary's loans for another three years. The currency war and the bluffing of central banks over who would be the most responsive and best able to drive the growth cycle for the post-2008 crisis decade began... We now know that this “battle” was very short-lived and that the US and China crushed the Eurozone... This phenomenon has been amplified by the growth of European sovereign debt, the monetary difficulties of the ECB, which was concerned about the crisis in the peripheral countries and then entangled with its some twenty  members, all of which have different balances and constraints, and the growing political and social instability in the zone... All of these issues clearly do not burden the US and China, whether for noble or less noble reasons...

So what will we remember from our twelve years of weekly publications?

-             That although bond markets are said to be calm, even boring, there is always something to say and a lesson to be learned, given how vast and varied these markets are in terms of issuers, contracts, innovation, corporate situations, and monetary, political, macroeconomic, and microeconomic interrelationships.

-             That credit analysis, unlike equity analysis, which is often based on outlooks, is often more reliable when it takes into account a company's past, and even its long-term past... How many times have we seen the same issuers disappoint again and again, each time a little more, while at the other end of the spectrum, reliable or low-debt issuers have maintained absolute reliability through long-term discipline?

- Similarly, rather than focusing on intangible factors such as strategic presentations, brands, goodwill, and other intangible assets, which have regularly led bond investors astray, credit analysis is generally much more reliable when it focuses exclusively on the most concrete elements of the balance sheet and income statement.

Plus me plaît la « tréso » qu’ont bâti mes cash-flows,

Que des slides brillants les graphes audacieux ;

Plus que l’EBITDA me plaît le vrai résultat,

 

Plus l’émetteur constant que les ajustements,

Plus un bilan lisible qu’un plan stratégique,

Et plus que l’espérance, l’analyse historique.

 

A certain Joachim might have written!

- Then, we would like to thank our traditional workhorses, the worst bond issuers, whose poems did not seduce us but which enabled us to produce distinctive weeklies, sometimes caustic but always in good faith and sometimes with a certain “vista” since we occasionally enabled our readers to avoid a few pitfalls... So, because few bond investors did so, and for good reason (!!), thank you Wirecard, thank you Abengoa, thank you IKKS, thank you Topsoho, thank you Thomas Cooke, thank you Selecta, but also Crédit Suisse and thank you to our two favorites, Atos and Rallye... We've probably forgotten some, but they probably won't hold it against us!

- “And when we fail, we learn!” say life coaches... So we learned from time to time too... With Steinhoff, that it is better to systematically sell, immediately and at almost any price, any bonds on which there is a hint of fraud... With Greece, that a state never goes bankrupt even if you lose everything... With Hertz, that the same issuer does not necessarily mean the same loan agreement... With CGG, that fair treatment of all bondholders is often illusory when the situation becomes critical for an issuer... And above all, much to the dismay of our corporate bond funds, which we built with the most down‑to‑earth logic possible, we learned, with the ECB, that zero is not the minimum price of money and that buying a 10-year Bund with a 0% yield could yield more the following year than buying a high-yield bond with a 4% or 5% yield!

- But thanks to reality, we were reassured to see that periods of financial eccentricity always come to an end, no matter how long they last. Whether it was the negative interest rates at the end of the 2010s, the inverted curve post-COVID, or companies with structurally negative cash flows that managed to issue bonds with a 4% yield for a CCC rating, the unwinding was extremely sudden and violent, and massive losses corrected these few years of moderate gains... Let us remember, because the anecdote is comical, the delighted investors who, in 2020, when the ECB had just knocked out rates with its “whatever it takes” policy, congratulated themselves on lending €5.8 billion to the Austrian government for 100 years at a yield of 0.85%! Yes, it makes us smile today that the yield on French OATs is over 2% at twelve months... After several years of market excesses and monetary policy forced to combat a systemic crisis with unconventional tools, investors are likely to have to wait, not 100 years of course, but probably 90 years, to recover their capital... But as I am leaving this weekly meeting, I will refrain from mentioning what I might consider to be the eccentricities of the moment and leave that to my dear colleagues Joelle Harb, Jean-Denis, Mathieu, and Thibaut, with whom I have had the pleasure of working for all these years and who will share their convictions with you during the traditional credit presentation at the beginning of the year, on Tuesday, January 13, 2026.

And because farewells and goodbyes should not be too long, I will conclude this weekly newsletter, these twelve years of Hebdo Crédit, these fifteen years of Octo AM, these twenty years of Octo, and these twenty-three years of bond markets, first as a broker and then as a fund manager, by saying THANK YOU to all of you for your loyalty and trust over the years.

Matthieu Bailly