IN FOCUS6-8 min read
Schroders Credit Lens September 2025: your go-to guide to global credit markets
What offsets some of the risk from tight credit spreads?
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Links to all three versions of the Credit Lens are provided below and at the bottom of the page.
- Credit spreads are close to their lowest levels for at least 20 years (slides 4, 26).
- But they look less stretched when viewed through a different lens: how much would spreads need to widen to wipe out the current spread? (slide 5).
- Why? Because duration is near 20-year lows in many areas. This means bond prices are less sensitive to changes in yields or spreads, so it takes a larger yield rise to generate the same price decline (slide 5).
- US HY and GBP IG have seen the sharpest declines in duration (slide 6)
- The USD IG and HY markets remain longer duration than EUR peers, making them more sensitive to rate and spread movements
- Corporate bonds offer a bigger margin of safety than you might think by looking at credit spreads alone, at least outside the US IG space. This doesn’t change the big picture about spreads being expensive, but it does provide some comfort to corporate bond investors (slide 7)
- EUR and GBP bonds offer a relatively large yield pickup over USD bonds on a fx-hedged basis (slide 8)
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