Global bond markets showed their biggest risk-off sentiment in over a year on Friday as AI stock selloffs and geopolitical tensions grew. Spreads on dollar bonds of Asian companies widened to levels not seen since last July. Gary Ng said, “Credit risk is now calling the shots, and Asia cannot hide.”
Metrics across global bond markets are signalling their biggest risk-off sentiment in more than a year, as a selloff in AI stocks and growing geopolitical tensions caused investors to seek out safe-haven assets.
On Friday, spreads on dollar bonds of higher-rated Asian companies widened to their highest levels since last July, moving in tandem with credit markets more broadly. That mirrors a jump in corporate bond yield premiums globally, which surged to their widest since May 2025, reaching up to 129 basis points, a Bloomberg index shows.
“Credit risk is now calling the shots, and Asia cannot hide from the storm,” Natixis senior economist Gary Ng said. “There is a clear US risk aversion in AI-related investment and other global factors that may keep interest rates elevated.”
Mounting concerns over the rapid pace of debt-fueled spending on AI is causing turmoil in markets amid fears that the technology won’t deliver profits soon enough. The sharp unwinding of AI bets has prompted debate among some prominent investors, with Citadel’s Ken Griffin warning of a bubble while Blackstone Inc. President Jon Gray said there’s no cause for concern as demand is “almost parabolic.”
Asian credit markets signalled weakness on Friday, with regional credit-default swaps earlier widening about 1.5 basis points to 78 and China technology spreads 3 to 5 basis points wider, according to traders. China investment-grade spreads were indicated as much as 5 basis points wider, while India investment-grade and Korean credit spreads widened as much as 3 basis points.
US Treasuries and Japanese bonds, seen as safer vehicles, both rallied. Treasuries saw their best day in more than two years, rising across all tenors.
“I see this as the beginning of a more sustained repricing of credit risk,” said Lakshmanan R, head of South and Southeast Asia corporates at CreditSights in Singapore. “It is the culmination of multiple global risks hitting markets one after another.”
Against that backdrop, Lakshmanan said he favours higher cash allocations and money-market instruments, as well as bank and financial-sector senior debt. Within credit, he prefers investment-grade over high-yield bets.