Macro Bites – Global Credit Spreads Widen as AI Selloff and Geopolitical Risks Mount

Israeli Prime Minister Netanyahu said his directive to the Israeli military and Mossad is to “overthrow the regime in Iran…Iran is once again attempting to develop a nuclear bomb…And so, as long as they are here, as long as they are willing to join a threatening and terrible weapon, the State of Israel is in existential danger. And our role, the role of all of us, is to save the nation. My good friend, President Trump, also believes that this is the only way.”

Metrics across global bond markets are signaling 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 July ’25.  That mirrors a jump in corporate bond yield premiums globally, which surged to their widest since May ‘25, reaching up to 129bps (Bloomberg). 

The 10-year French OAT yield spread over German Bunds widened to 177.7bps, the widest since Nov. ’11 during the eurozone debt crisis.  However, French spreads are not alone, with yield gaps over Bunds widening across the EU.  Belgium's spread widened 10bps to 110bps (highest since ’12), Italy's rose 10.5bps to 123 bps, Spain's widened 6bps to 70bps and Greece's increased 8.5bps to 106bps. Citi noted, “Re-emerging euroscepticism is a constraint here.”

AI watch: A Meta 14C filing disclosed it has agreed to spend about $825B on future leases and contracts, many of them related to computing power and AI infrastructure. Operating and finance leases not yet included on Meta's balance sheet are valued at $355.7B. That includes data centers and energy infrastructure leases starting during the remainder of this year through 2036.