Amid continued volatility in sovereign bond yields, a remarkably stable feature of markets has been in bond spreads, with little signs currently of a surge in corporate spreads, as was seen following the last inflation shock in 2022.
Given the relatively muted trends in headline inflation versus that previous shock, current market pricing looks over done.
In contrast, corporate spreads remain close to historic lows, both in Europe and the US, trading between 50-80bps above risk-free rates.
However, the AI investment cycle in the US and globally is set to rival if not surpass previous super cycles in real estate and Telecoms in the 1990/2000s, and even the railroad boom of the 1800’s.
