Syz Bank of Switzerland points out that the US low-rated corporate bond market has experienced significant pressure, but the risk has not yet widely spread to high-rated companies. Credit spreads on CCC-rated bonds have widened to approximately 11.3%, and high-yield credit default swap (CDS) spreads have remained above their continuously rising 200-day moving average for the third consecutive week. Meanwhile, there are no clear signs of risk contagion in the investment-grade bond and BBB-rated credit markets.
Syz believes that the current US stock market correction is primarily driven by sector rotation, with corporate earnings expectations and market breadth continuing to provide support. However, credit spreads for some AI infrastructure companies have begun to widen. Meta and Alphabet experienced negative free cash flow in the third quarter, and Meta also supported capital expenditures through equity financing, indicating that AI investment expansion is facing a more stringent test of financing capabilities.
Whether credit pressure can spread from low-rated bonds such as CCC-rated bonds to BBB and higher-rated companies will be a key indicator for Syz in assessing market risk.
The bank is currently maintaining a neutral equity allocation, but stated that it will reassess this position if credit risk spreads upward along the rating system; if high-yield bond spreads begin to decline, it could create conditions for increasing risk exposure after a market correction.
