Take credit spreads – the gap between the yield on government bonds and corporate debt – which tend to blow out at times of stress. Some argue that top-grade corporate credit could trade on lower yields than governments (the spread on US AAA-rated bonds is around 0.3pp). The growth of private credit – the hottest area in alternative assets over the past few years – means that lower-quality borrowers have migrated there to get more favourable terms. (Image credit: S&P Global)Of course, tight spreads also explain why higher yields in private credit have proved so attractive. One has to figure there will be a reckoning here when the cycle turns, making low credit spreads in bonds a dangerous reason to reach further for higher yields in private credit.