A highly capital-intensive AI boom – the biggest capital raising exercise since the TMT boom – is beginning to weigh on IG credit spreads, as investors demand a risk premium, though higher government yields dampened spread widening in Q3. Meanwhile, the AI capex boom plus the long inflation tail on the energy shock finally forced a tightening from the Fed as patience ran out on the inflation overshoot. Nominal government yields stand above 40-yr means, led by JGBs and Treasuries, with JGBs and the yen both near undervaluation extremes.
Key highlights:
- Macro and policy backdrop – Fed turns hawkish as PCE deflator moves above 3%
- Spotlight on current G7 government bond yield levels – how “high” are they versus history?
- FX – Yen weakened to 1986 levels versus USD but rallies on fx intervention
- US Treasuries and credit – Nominal and corporate IG yields follow real yields higher
- Canadian governments, provis and munis – Yields continue to de-couple as BoC holds rates
- Canadian IG and HY credit – Credit spreads less affected by energy shock than US
- Performance – G7 yields rise after monetary tightening, hyperscaler spreads widen
These reports provide actionable insights on global fixed income markets. They cover shifts in global yield curve and credit spreads, across sovereign, inflation-linked and corporate indices, and FX-adjusted return performance using proprietary month-end data from our global fixed income indices.
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