Credit markets turned shaky in Asia on Monday, with the cost of insuring against corporate and sovereign default higher as recession fears rippled across financial markets.

The five-year credit default swap spread on the Markit Itraxx Asia ex-Japan index, comprising sovereign and company debt, rose about 26 basis points to its highest since August last year, according to S&P Global data.

Sovereign spreads for China, Vietnam, Indonesia, Thailand and Malaysia also widened, S&P Global data showed.

Unusually the pressure on credit has followed, rather than led, a tailspin in world stock markets as US President Donald Trump declared a trade war in earnest by levying the highest tariffs on US imports in over a century.

US equity futures were down nearly 4 per cent by mid-session in Asia and selling in credit came as equity markets from Hong Kong to Sydney were crumbling.

“It’s not just the equity market. We’ve seen credit spreads gap wider materially and we’re also hearing various fund flows going the other way as well, as people try to get into cash or other commodities,” said Simon Ward, head of debt capital markets for Australasia at Mizuho in Sydney.

He said the debt market would probably enter a “wait and see” mode, with deals on pause as volatility has spiked.

The spread or difference in yield between US Treasuries and the ICE BofA index of US investment-grade debt has widened about 20 basis points since Trump’s tariff announcements, and for high-yield US debt, it has widened about 96 bps.

Published on April 7, 2025