AI tech fears push global credit spreads to 17-month high
Metrics across global bond markets are signalling their biggest risk-off sentiment in more than a year, as a selloff in artificial intelligence stocks and growing geopolitical tensions caused investors to seek out safe-haven assets.
On Friday, spreads on dollar bonds of higher-rated Asian companies widened to their highest levels since July 2025, moving in tandem with credit markets more broadly. That mirrors a jump in corporate bond yield premiums globally, which surged to their widest since May 2025, reaching up to 129 basis points, a Bloomberg index shows. Euro investment-grade corporate bonds have followed suit, with index spreads hitting the highest since May 2025.
"Credit risk is now calling the shots, and Asia cannot hide from the storm," Natixis senior economist Gary Ng said. "There is a clear US risk aversion in AI-related investment and other global factors that may keep interest rates elevated." Mounting concerns over the rapid pace of debt-fuelled spending on AI is causing turmoil in markets amid fears that the technology won't deliver profits soon enough. Citadel's Ken Griffin has warned of a bubble, while Blackstone Inc president Jon Gray said there's no cause for concern as demand is "almost parabolic".
Asian credit had pared some of its weakness, with spreads on regional credit-default swaps about one basis point wider, compared with 2bps earlier in the day, according to traders. Still, the surge in volatility prompted Export-Import Bank of Korea to postpone a yen bond sale. The rout in the AI trade faded somewhat on Friday, offering investors some respite while Treasuries gave up some of the gains from the previous session's rush for safety. Still, a gauge of the inverse relationship between US government bonds and AI-focused stocks has strengthened to levels last seen a year ago.
Norbert Ling, Asia Pacific head of fixed income portfolio management at Invesco, said he remains constructive on credit as an asset class. "Wider spreads are giving investors more compensation for high quality credit risk," he said. Lakshmanan R, head of South and Southeast Asia corporates at CreditSights in Singapore, said he sees this as the beginning of a more sustained repricing of credit risk, and that it is the culmination of multiple global risks hitting markets one after another. He favours higher cash allocations and money-market instruments, as well as bank and financial-sector senior debt, and prefers investment-grade over high-yield bets.
