Summary:
U.S. corporate bond spreads
- Investment-grade U.S. corporate spreads remain very tight: the broad U.S. corporate OAS (option-adjusted spread) is approximately 0.81% (81 basis points) as of early November 2025.
- The BBB segment of U.S. corporate bonds sits at roughly 1.04% spread over Treasuries.
- Historically low spreads reflect strong investor demand, limited risk premia, and favourable credit conditions. But regulators note spreads are compressed and may lack buffer against downside risk.
Emerging-market corporate bond spreads
- The EM corporate bond OAS for non-sovereign USD/Euro-denominated debt is about 1.57% (157 basis points) as of early November 2025.
- Although higher than U.S. IG spreads, EM corporate spreads are still regarded as tight relative to historical levels and relative to their underlying credit fundamentals.
- Analysts argue that EM corporates now offer less room for spread compression, but still provide attractive yield and diversification compared to developed-market credit.
Key take-aways
- Both U.S. and EM corporate spreads are at elevated narrowness, signalling strong risk appetite and limited compensation for credit and liquidity risk.
- The U.S. spread environment looks particularly “benign,” raising questions about whether it appropriately reflects underlying macro and credit risks.
- EM corporate spreads offer higher yield premiums, but the tightening they’ve already experienced suggests less “upside” for further spread compression—meaning returns will increasingly depend on carry and idiosyncratic credit performance.
- For investors, this means vigilance is required: tight spreads reduce cushion against adverse events (e.g., economic slowdown, policy shifts). The incremental reward for taking extra credit risk is muted, especially in the U.S. market.
Figure 1: US Credit Spreads
Figure 2: Australian Swap to Bond Spreads
