As credit spreads or the cost of issuance continued to rise due to concerns that U.S. President Donald Trump’s tariff battle could trigger a recession, the U.S. investment-grade and high-yield bond markets did not announce any new offerings for the third day in a row.
Credit spreads, or the premium that businesses paid on bonds over Treasuries, have widened significantly to new two-year lows since Trump placed broad tariffs on U.S. imports on Wednesday.
According to the most recent data available, the average investment-grade spreads were 114 basis points on Friday. This is the highest they have been since November 2023 and 18 basis points wider than last Wednesday.
According to ICE BAML data, the average high-yield spreads at 445bp have expanded 103bp since Wednesday and are currently at their widest points since November 2023.
In a note, BMO credit strategist Daniel Krieter stated that IG spreads were an extra 3 basis points wider this morning.
According to two bond syndicate bankers, the halt comes after a period last month when corporations found it difficult to issue bonds at the price they desired for the first time since the epidemic. This condition is still present on Monday.
“A few companies looked early to issue bonds, but they decided not to proceed because they were uncertain that demand would be sufficient to support issuance without being asked to pay a massive premium due to ongoing market volatility,” one syndicate banker, who wished to remain anonymous, said.
Krieter stated, “What would start to change the narrative and give risk assets some respite from the aggressive selling of the past few sessions is obviously the most pressing question at this point.”
“Though the weekend’s developments don’t provide much hope for either outcome in the near term,” he added, it would be beneficial if the administration softened its stance or if America’s trading partners were more eager to engage in negotiations.
