BlackRock(US:BLK) Hua Er Jie Jian Wen·2025-10-16 07:46Core Viewpoint - Major asset management firms, including BlackRock, Fidelity International, and M&G, are reducing exposure to high-risk corporate bonds due to concerns over potential sell-offs if the global economy weakens, shifting towards safer high-rated corporate bonds or government bonds [1][2]. Group 1: Market Conditions - The spread between U.S. and European investment-grade bonds and government bonds is currently about 0.8 percentage points, significantly narrowed from over 1.5 percentage points in 2022, approaching the lowest level since the 2008 financial crisis [1]. - There are concerns that the recent rally in credit markets, driven by easing trade tensions and expectations of Federal Reserve rate cuts, may have led to overly optimistic pricing regarding global economic growth [1][3]. Group 2: Investor Sentiment - Investors are showing signs of resistance in high-risk areas of the corporate bond market, with several leveraged loan deals being shelved recently, indicating a shift towards safer debt options [3]. - A high-yield bond trader noted that numerous defaults in the past weeks are shaking investor confidence [3]. Group 3: Defensive Positioning - F&C Investment Trust has reduced its credit bond positions to "neutral" and sold off high-yield bonds due to increasing costs compared to government bonds [4]. - M&G Investments is shifting towards higher-rated corporate credit and guaranteed bonds issued by life insurance companies, as the cost of selling BBB-rated unsecured bonds and buying these alternatives is at a historical low [4]. Group 4: Yield Considerations - Despite rising government bond yields, the overall yield from corporate bonds is still viewed as attractive, with the yield on U.S. investment-grade bonds at approximately 4.8% according to the Ice index [5].