Amid rate volatility and ongoing geopolitical tensions, credit dispersion increased in the Asiadollar space during April. Bloomberg Asia IG spreads continued to reach new all-time lows, falling below 80 bps on April 10 before finishing the month at 80 bps, tighter by around 6 bps m-o-m. Bloomberg Asia HY spreads however widened by 19 bps m-o-m to 605 bps. As at May 6, Bloomberg Asia IG spreads remained unchanged compared to the end of April, yet Bloomberg Asia HY spreads tightened by 39 bps partly driven by softer economic data in early May.
Rates are now staying higher for longer. The 10-year US Treasury yield rose 48 basis points (bps) m-o-m in April to 4.68% as at April 30 amid a resilient US economy, corporate earnings, labour markets and stubborn inflation.
The yield softened modestly to 4.47% as at May 6 compared to April 30 against the backdrop of weaker-than-expected macroeconomic data (such as US non-farm payroll, unemployment rate and wage growth). The market is now pricing in merely two rate cuts from the US Federal Reserve this year, a huge contrast to the consensus estimation of six rate cuts made earlier this year.
