Collateralized loan obligation managers in Europe are preparing for the post-pandemic world of rising credit risk by adding more flexibility to their traditionally strict structures, Bloomberg News reported. CLOs -- which package speculative debt into bonds -- have been including options to participate in restructurings and remain involved in financings even if they go south. And while managers don’t expect a sudden deterioration of junk-rated loans and bonds anytime soon, with defaults in Europe still historically low, they want to be prepared in case things sour.

The Bank of England has begun talks with the U.K. Debt Management Office and the Treasury over how to handle active sales of bonds held in its quantitative easing portfolio, Bloomberg News reported. The discussions come as the central bank last week said it would begin running down its 875 billion pounds ($1.2 trillion) of government bond holdings for the first time by letting expired gilts fall off its balance sheet, and reiterated it would consider active sales once interest rates hit 1%.

It’s “unrealistic” that the European Central Bank will raise interest rates in June, Governing Council member Gabriel Makhlouf told the Financial Times, Bloomberg News reported. The central bank may stop net bond purchases in June or a few months later, after which it would raise rates, he told the newspaper, adding that there’s “a bit of difference” between its schedule and the one market participants are anticipating.

Italian Prime Minister Mario Draghi played down concerns that widening government bond spreads may put the improvement of the country’s finances at risk, Reuters reported. “Spread rose for almost every country,” Draghi said at a press conference Friday in Rome, adding that sustained growth and budget discipline are key to keeping finances in check. Yields on Italian bonds rose sharply this week after the European Central Bank signaled mounting inflation concerns and a potential acceleration in dialing back monetary stimulus.

Inflation in countries using the euro, which has soared to record heights in recent months, is expected to peak in the first quarter of this year, the European Commission said on Thursday, as consumers feel the bite of higher energy prices and rising costs of key goods, the New York Times reported. Inflation in the euro area for the January-to-March period will reach 4.8 percent, up from 4.6 percent in the fourth quarter of last year, which was a record since the bloc started measuring inflation collectively in 1997, the commission said in its quarterly economic forecast.

Over the past decade, Credito Real SAB was the rising star of a booming new business in Mexico: cutting small loans -- and charging double-digit interest rates -- to the millions of traditionally unbanked all across the country. Now, with its cash hoard shrinking, Credito Real faces a moment of truth, Bloomberg News reported. It either pays off 170 million Swiss francs ($184 million) of bonds due by the end of Wednesday, or goes the way of a smaller peer in the non-bank lending industry that has already fallen into default.

The European Central Bank's German policymakers openly discussed prospects for an interest rate hike on Wednesday, with new Bundesbank chief Joachim Nagel arguing that a move could come this year, as inflation remains uncomfortably high, Reuters reported. The ECB last week walked back on a pledge not to raise rates in 2022 and policymakers are now looking at how best to dismantle unconventional policies that have kept the euro zone afloat for much of the past decade.

As much as £20 billion of taxpayer-backed Covid loans may have to be written off because of defaults by struggling borrowers, insolvency practitioners have warned, the London Times reported. The resignation of Lord Agnew of Oulton, the counter-fraud minister, has prompted an increased scrutiny of losses to criminals in the government’s emergency schemes, but Azets, an accountancy firm, has warned that these will be eclipsed by the hit to the public purse from legitimate borrowers going bust.

Sweden will phase out the majority of its current pandemic support measures, with the decision coinciding with a lifting of most restrictions from Wednesday, Bloomberg News reported. The support measures to companies will stay in place through February, Finance Minister Mikael Damberg told a news conference in Stockholm on Tuesday. “Now is the time for normality and not least a more normal budget process,” he said. The biggest Nordic nation became an outlier at the start of the pandemic due to its relatively hands-off Covid strategy.

European electricity prices jumped after the region’s biggest power producer cut its nuclear output target for a second time in a month, the latest sign that this winter’s energy crisis is far from over, Reuters reported. Electricite de France SA said its nuclear production could fall this year to levels not seen since 1990, and Morgan Stanley says there’s a “meaningful likelihood” of a production cut for 2023. The shortfall has forced France to import electricity at times, tightening supplies in neighboring countries used to relying on the nuclear giant to keep the lights on.