When do relative opportunities typically arise in international credit markets?

Relative opportunities in international credit markets usually arise from variations in credit cycles, quality, and sector composition. These differences can create situations where certain bonds or debt instruments are undervalued or overvalued relative to others, offering investors the potential for better returns through careful selection.

Credit cycles vary from country to country due to differences in economic conditions, regulatory environments, and market dynamics. This variance leads to disparities in credit quality. For instance, one market might be experiencing an economic boom, positively impacting the credit outlook of issuers, while another might be in a downturn, leading to deteriorating credit quality. As investors assess these conditions, those familiar with the intricacies of different markets can identify opportunities to capitalize on mispriced securities.

Sector composition also plays a crucial role, as different sectors may respond differently to macroeconomic changes. An investor may find that certain sectors in specific countries are poised for growth due to local economic conditions while others lag behind, further contributing to the relative opportunities available in the international credit markets.

The other options do not capture the primary drivers of relative opportunities as effectively. Stabilizing interest rates globally may reduce volatility but does not inherently create disparities in credit valuation. Market downturns and economic slowdowns can yield opportunities, yet they are often accompanied