With credit spreads near multi-year tights and seemingly resilient against recent wobbles within equity markets, the backdrop appears vulnerable to signs of economic weakness, especially amid ongoing geopolitical tensions and the US government shutdown, which could trigger a snapback in spreads.
Credit spreads continue to trade at or near multi-year or historically low levels as of Nov 7, despite prevailing risks, with credit markets rallying amidst periodic risk-on sentiments and expectations for Fed rate cuts. Asia USD investment-grade and high-yield spreads have tightened considerably in 2025 and are both trading at around half of their 10-year averages.
US and EU investment-grade spreads have also compressed, and while not as historically tight as those in Asia, both are still substantially below their 10-year averages.
