Morgan Stanley recommends selling Austria’s bonds amid downgrade risks

Austria’s sovereign bonds are getting the cold shoulder from one of Wall Street’s biggest names. Morgan Stanley has advised clients to sell Austrian bonds, citing the growing risk of further credit rating downgrades in a country that’s been quietly sliding down the creditworthiness ladder for over a year. Fitch Ratings downgraded Austria’s Long-Term Foreign-Currency Issuer Default Rating from ‘AA+’ to ‘AA’ back on June 6, 2025, assigning a Stable outlook. Then Morningstar DBRS followed suit roughly a year later, downgrading Austria to AA (high) around June 5, 2026. S&P Global Ratings downgraded four Austrian banks in March 2026, pointing to heightened economic risks tied to a lingering recession and sluggish growth across the region. JPMorgan had already flagged the risk months earlier, estimating in January 2026 that there was roughly a 50% probability of further downgrades for Austria, alongside Belgium and France. Morgan Stanley’s fixed income bulletins from July 2026 reveal a broader underweight stance on investment-grade credits across the board, driven by tight valuations and limited room for spreads to compress further. Morgan Stanley’s July report did express a preferen...