Driven by growing anxieties over an artificial intelligence (AI) bubble and heightened geopolitical tensions in the Middle East, investors' preference for safe-haven assets has intensified, pushing global corporate bond credit spreads to their highest level in 1 year and 5 months.

According to Bloomberg on the 23rd (local time), the global corporate bond credit spread rose to its highest level since May 2025 based on the Bloomberg index. The spread widening for some indicators reached up to 129 basis points (1 bp = 0.01 percentage point).

A credit spread refers to the difference in yield between a bond carrying credit risk and a benchmark bond. In the corporate bond market, it is typically measured as the yield differential between corporate bonds and government bonds of similar maturity.

It can be viewed as the additional yield demanded by investors in compensation for taking on credit risk. A widening spread indicates that investors' risk-averse sentiment has strengthened or that market conditions have deteriorated.

This trend was mirrored across Asia and Europe as well.

The credit spread on U.S. dollar-denominated bonds issued by Asian investment-grade companies widened to its highest level since July 2025 on this day. Amid heightened market volatility, the Export-Import Bank of Korea postponed its planned issuance of yen-denominated bonds, Bloomberg reported.

Asia's credit default swap (CDS) spread also widened by 2 bps at one point during the session before narrowing to 1 bp. A CDS is a derivative contract traded to manage the default risk of a bond issuer, and a wider CDS spread indicates that the credit risk evaluated by the market is growing.

In Europe, credit spreads on investment-grade corporate bonds similarly climbed to their highest levels since May 2025.

At the core of this market instability lies skepticism regarding the profitability of the AI industry. As AI investments accompanied by massive borrowing continue to expand rapidly, concerns are mounting over whether technology companies can generate revenues commensurate with their investment scale, triggering sell-offs in related stocks.

Geopolitical tensions in the Middle East have also stoked investors' risk-aversion sentiment.

"Credit risk is now driving the market trend," said Gary Ng, a senior economist at Natixis. "Asia cannot escape these shocks either."

Meanwhile, some market participants view the widened spreads as a potential investment opportunity in high-grade corporate bonds.

Norbert Ling, Head of Asia-Pacific Fixed Income Portfolio Management at Invesco, maintained an overall positive stance on credit assets, diagnosing that "wider spreads offer higher compensation for investors willing to shoulder the credit risk of solid corporations."

On the other hand, Lakshmanan R, Head of Asian Corporate Credit Research at CreditSights, warned, "We view this as the beginning of a more sustained phase of credit risk repricing," advising investors to increase their cash and short-term financial instrument weightings while focusing on senior unsecured bonds issued by banks and financial institutions.

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