(Finest data is corrected with Para 3 and Bullets)
Shankar Ramakrishnan
(Reuters) – For the third day in a row, no new services were announced in the US investment grade and high-yield bond markets that US President Donald Trump’s tariff war could lead to a recession as credit spreads or issuance costs continued to rise.
Since Trump imposed a sweep tariff on U.S. imports on Wednesday, premium companies paid more on credit spreads or bonds than the Treasury Department have expanded sharply to new two-year lows.
The average investment grade spread was 114 basis points on Friday, with the latest available data, or 18bp wide since last Wednesday, which is the widest since November 2023.
According to ICE BAML data, the average high yield spread at 445bp expanded 103bp from Wednesday, the widest level since November 2023.
The IG spread was an even broader 3bp this morning, BMO credit strategist Daniel Creator said in a memo.
The suspension followed last month a period of hard work last month when companies struggled to issue bonds at the price they wanted, for the first time since the pandemic.
There were a few companies that seemed early to issue bonds, but they decided not to move forward because they were not convinced that ongoing market volatility was enough to support issuance without paying large premiums, said a syndicated banker who wanted to name it.
“The most pressing question at this point is clearly beginning to turn the narrative and give risk assets some rest from aggressive sales of the past few sessions,” Krieter said.
The softening of the tone from the administration and the urgency of negotiations from American trading partners “weekend development gives little hope for either outcome in the near future,” he said.
(Reporting by Shankar Ramakrishnan, Editing by Nick Zieminski)
