Latest news with #ICEBofAHighYieldIndex
Yahoo
04-04-2025
- Business
- Yahoo
US Junk bond spreads surge to 17-month high on trade war fears
(Reuters) - U.S. high yield corporate bond spreads surged to 401 basis points as of late Thursday, their highest since November 2023, as global markets swooned over fears that U.S. President Donald Trump's plan for import tariffs would kick off a trade war. The options adjusted spread on the ICE BofA High Yield Index, which measures the difference in yields between junk bonds and Treasury debt rose from 342 basis points on Wednesday, while spreads on investment grade bonds rose to 106 bp, the highest since August 2024, from 96 bp. Sign in to access your portfolio
Reuters
12-03-2025
- Business
- Reuters
US corporate bond spreads hit widest in about 6 months on recession fears
March 12 (Reuters) - The spreads between the yields on corporate bonds and U.S. Treasuries hit their widest since September this week, pointing to mounting investor worries about recession and a global trade war. U.S. investment-grade bond spreads hit 94 basis points on Tuesday, their widest level since Sept. 18, according to the ICE BofA Corporate Index (.MERC0A0), opens new tab. Junk bond spreads widened to 322 bps, also their widest since Sept. 18, according to Tuesday's late update of the ICE BofA High Yield Bond Index (.MERH0A0), opens new tab. Investors consider U.S. corporate bond spreads a good gauge of financial market stress, especially the gap between yields on bonds issued by companies with poor credit ratings and ultra-safe U.S. government debt. When the gap widens it shows less willingness to hold riskier "junk" bonds. The widening in spreads comes as the latest sign of growing anxiety about the economic outlook following a series of import tariffs imposed by the Trump administration that raised the specter of a global trade war. "This will be inflationary, and the Fed won't likely be able to cut rates in this environment," said Andrzej Skiba, head of BlueBay U.S. fixed income at RBC GAM. "This could put pressure on fixed income assets, and we see more spread widening and risk ahead." A Reuters poll last week found 95% of economists across Canada, the U.S. and Mexico said the risk of a recession in their respective countries had increased following Trump's chaotic tariff implementation. "The escalation of tariff hostilities and re-rating in Tech sector valuations is causing contagion from stocks to credit in a way not observed in a while and is stoking fears that the economy could veer off the tracks," Societe Generale analysts wrote in a Wednesday note. The junk bond spread has opened up by 59 bps since a recent low on Feb. 18, JPMorgan analysts noted on Wednesday. They added that junk spreads are "biased wider" over the coming months, due to "vast macro uncertainty" surrounding trade policy, inflation and recession. Corporate bond spreads are still tight on a historical basis, the analysts noted. Junk spreads late last year contracted to around 250 basis points, the lowest since 2007, before the Financial Crisis, during which they blew out to more than 2,000 basis points or twenty percentage points. They were well above 350 bps for the majority of 2022 and 2023, according to the ICE BofA High Yield Index. Nicholas Elfner, co-head of research at asset manager Breckinridge Capital Advisors, said that as the impacts of President Trump's potentially inflationary economic and fiscal policies become clearer, U.S. corporate bond spreads are expected to widen further. This should bolster the yield allure of corporate debt for investors, including from foreign investors, who overtook insurers and pension funds in 2024 in demand for corporate bonds, Elfner said.
Yahoo
06-03-2025
- Business
- Yahoo
US corporate bond investors cautiously navigate trade war uncertainty
By Matt Tracy (Reuters) - Pressure on corporate bond spreads, or the premium paid by companies over risk-free Treasuries, to widen will likely persist as investors grow cautious of the domestic economic outlook and await the implications of the global trade war. High-yield bond spreads hit a peak 299 basis points (bps) on Tuesday, their widest since October 2024, before tightening back in yesterday to 288 bps, according to the ICE BofA High Yield Index. They are currently 31 bps wider since February 18. Investment-grade spreads similarly widened this week to 89 bps, also an almost five-month wide, before tightening in to 87 bps on Wednesday, according to the ICE BofA Corporate Bond Index. Bond investors pointed to the trade war launched on Tuesday by the Trump administration as the biggest reason for spread widening this week. President Donald Trump imposed 25% tariffs on Mexican and Canadian imports, levied 10% tariffs on Canadian energy imports, and doubled his tariff on Chinese products to 20%. "This could put pressure on fixed income assets, and we see more spread widening and risk ahead, something we positioned our strategies for having de-risked in recent months," said Anrzej Skiba, head of BlueBay U.S. fixed income at Stamford, CT-based asset manager RBC GAM. "We favor short duration assets, and as volatility picks up, we hope to reengage with the asset class at better entry points once the dust settles," he added. Though a recovery in U.S. stocks on Wednesday pushed corporate spreads tighter, investors anticipate spreads could gradually continue to widen in the coming months, as the negative economic consequences of an ongoing or even intensifying trade war make themselves apparent. "We've seen preloading of (corporate) inventories ahead of the eventual tariffs, and we've seen consumer savings rise, which are often a presage to recessions," said Guy LeBas, chief fixed income strategist at asset manager Janney Capital Management. "But the economy doesn't move that fast - everything we're talking about is marginal deterioration, and it's hard to draw a line through any one datapoint," he added. Continued economic gloom and widening spreads could put a significant dent in new corporate bond issuance, particularly from lower-rated issuers, as the cost of capital increases. 'A Baa-rated corporate seeking to issue a bond now would need to pay a yield almost double the level four years ago," said David Hamilton, managing director and head of asset management research at Moody's, in a Tuesday report. As of January 2025, the typical yield on Baa corporate bonds is above 6% — compared to just above 3% in 2021, Hamilton wrote. "It's going to be a bumpy couple of months until you see a conclusion of what's getting implemented," said Mike Sanders, portfolio manager and head of fixed income at investment manager Madison Investments. Sign in to access your portfolio
Reuters
06-03-2025
- Business
- Reuters
US corporate bond investors cautiously navigate trade war uncertainty
March 6 (Reuters) - Pressure on corporate bond spreads, or the premium paid by companies over risk-free Treasuries, to widen will likely persist as investors grow cautious of the domestic economic outlook and await the implications of the global trade war. High-yield bond spreads hit a peak 299 basis points (bps) on Tuesday, their widest since October 2024, before tightening back in yesterday to 288 bps, according to the ICE BofA High Yield Index (.MERH0A0), opens new tab. They are currently 31 bps wider since February 18. Investment-grade spreads similarly widened this week to 89 bps, also an almost five-month wide, before tightening in to 87 bps on Wednesday, according to the ICE BofA Corporate Bond Index (.MERC0A0), opens new tab. Bond investors pointed to the trade war launched on Tuesday by the Trump administration as the biggest reason for spread widening this week. President Donald Trump imposed 25% tariffs on Mexican and Canadian imports, levied 10% tariffs on Canadian energy imports, and doubled his tariff on Chinese products to 20%. "This could put pressure on fixed income assets, and we see more spread widening and risk ahead, something we positioned our strategies for having de-risked in recent months," said Anrzej Skiba, head of BlueBay U.S. fixed income at Stamford, CT-based asset manager RBC GAM. "We favor short duration assets, and as volatility picks up, we hope to reengage with the asset class at better entry points once the dust settles," he added. Though a recovery in U.S. stocks on Wednesday pushed corporate spreads tighter, investors anticipate spreads could gradually continue to widen in the coming months, as the negative economic consequences of an ongoing or even intensifying trade war make themselves apparent. "We've seen preloading of (corporate) inventories ahead of the eventual tariffs, and we've seen consumer savings rise, which are often a presage to recessions," said Guy LeBas, chief fixed income strategist at asset manager Janney Capital Management. "But the economy doesn't move that fast - everything we're talking about is marginal deterioration, and it's hard to draw a line through any one datapoint," he added. Continued economic gloom and widening spreads could put a significant dent in new corporate bond issuance, particularly from lower-rated issuers, as the cost of capital increases. 'A Baa-rated corporate seeking to issue a bond now would need to pay a yield almost double the level four years ago," said David Hamilton, managing director and head of asset management research at Moody's, in a Tuesday report, opens new tab. As of January 2025, the typical yield on Baa corporate bonds is above 6% — compared to just above 3% in 2021, Hamilton wrote. "It's going to be a bumpy couple of months until you see a conclusion of what's getting implemented," said Mike Sanders, portfolio manager and head of fixed income at investment manager Madison Investments. Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here.
