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Corporations Outshine Governments as Safer Bets for Investors
12 Nov
Summary
- Investors demand lower yields for corporate bonds than government bonds
- Governments in rich countries continue to spend, increasing debt-to-output ratio
- Populist politics corroding basis for tough fiscal compromises
As of November 2025, the global bond market has seen a significant shift, with investors increasingly viewing some companies as safer bets than even the most powerful governments. In the $150 trillion global bond market, a combination of huge demand for corporate bonds and fiscal backsliding by governments in rich countries has led to a situation where investors are demanding lower yields for bonds issued by companies like Microsoft, Airbus, L'Oreal, and Siemens than for bonds issued by their countries of origin.
This phenomenon, while not entirely unprecedented, is a sign that populist politics is corroding the basis for tough fiscal compromises. Successive French prime ministers have failed to pass measures reining in the budget, while in the US, the federal deficit is set to remain above 6% for the rest of President Donald Trump's second term. These moves to bypass convention have unnerved investors, leading them to prefer corporate balance sheets that are in better shape than some sovereigns.
The erosion of the perception of rule of law has been a key factor in this shift, as investors seek stability and predictability in their investments. As a result, the core of portfolio construction in the US or Europe, which has traditionally been dominated by Treasury bonds and German or UK sovereigns, is now seeing a growing presence of corporate bonds as safer alternatives.
