A European savings glut or just mis-priced risk?

Whilst we ponder over what Draghi might or might not do at tomorrow’s ECB meeting, here’s an interesting point from Ramin Nakisa and Stephane Deo at UBS that’s worth bearing in mind during the press conference:

The chart below shows how the risk premium has evolved over the recent past: it shows how many basis points of spread are demanded by investors in exchange for a one notch downgrade. While Europe Area spreads were extremely cheap during the crisis, they are now too expensive.