Global corporate bond credit spreads widened to their highest level in 1 year and 5 months as investors' preference for safe-haven assets intensified due to growing concerns over an artificial intelligence (AI) bubble and heightened tensions in the Middle East.

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

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

It can be viewed as the additional yield investors demand in exchange for taking on credit risk, and a widening spread suggests that investors' risk-aversion sentiment has strengthened or market conditions have deteriorated.

This trend was also observed in Asia and Europe.

Credit spreads on dollar-denominated bonds issued by Asian high-grade companies widened to their highest level since July 2025 on this day.

As market volatility increased, the Export-Import Bank of Korea postponed its issuance of yen-denominated bonds, Bloomberg reported.

Asian credit default swap (CDS) spreads also widened by 2 bps at one point during the session before narrowing to 1 bp.

CDS is a derivative product that trades the default risk of a bond issuer, and a widening CDS spread indicates that the credit risk evaluated by the market is increasing.

In Europe, credit spreads on investment-grade corporate bonds also rose to their highest level since May 2025.

Behind the market anxiety lies skepticism regarding the profitability of the AI industry. As AI investments accompanied by massive borrowing rapidly increase, concerns are growing over whether tech companies can generate revenues matching the scale of their investments, leading to a sell-off in related stocks.

Geopolitical tensions in the Middle East also stimulated investors' risk-off sentiment.

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

In the market, some assessments suggest that the widened spreads could present investment opportunities in high-quality corporate bonds.

Norbert Ling, head of Asia-Pacific fixed income portfolio management at Invesco, maintained a positive stance on credit assets overall, diagnosing that "wider spreads offer higher compensation for investors willing to take on the credit risk of high-quality companies."

On the other hand, Lakshmanan R, head of Asia corporate credit research at CreditSights, said, "We see this as the beginning of a more sustained phase of credit risk repricing," and recommended increasing cash holdings and short-term financial instruments while paying attention to senior bonds issued by banks and financial institutions.

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