This tightening can be partly attributed to the “Trump trade”, which began weeks before the US elections and continued afterwards. Market sentiment has shifted to a risk-on stance, fuelled by expectations that President-elect Donald Trump’s presidency will promote stronger economic growth through business-friendly policies.
Credit spreads have hit another record low. As of Nov 8, Bloomberg Asia’s US dollar (USD) investment-grade spreads have tightened to yet another record low of 71 basis points, significantly lower than the five-year historical average of 136 basis points (bps).
Credit spreads, which represent the difference in yield between US Treasuries — considered a safe asset — and corporate bonds, which typically carry a higher risk of default, serve as a measure of the additional compensation investors demand for holding corporate bonds.
