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Bankers are urging US companies to tap debt markets now to fend off the risk that Donald Trump’s trade war sets off another wave of market tumult that makes borrowing more challenging.
US corporate lending markets have stabilised markedly since Trump triggered steep falls in asset prices with his April 2 announcement of big tariffs on trading partners.
Yields on speculative rated US bonds have eased to 7.84 per cent from a high of 8.65 per cent on April 7, according to Ice Data Services.
The reprieve in markets, prompted by Trump pausing most of his steep “reciprocal” tariffs and data showing the US economy fared better than some investors had feared in early 2025, has created a good opportunity for groups to raise funds, according to investors, bankers and analysts.
“Companies should take advantage of the current 90-day tariff pause and the resulting more favourable market conditions before another potential spike in volatility later in the year,” said Yuri Seliger, credit strategist at Bank of America.
A leveraged finance banker added that “the rest of the year might be a sloppy mess . . . I firmly believe now is a good time to go.”
Companies with speculative, or “junk”, credit ratings sold the fewest bonds last month since July 2023 — in the least active April since the 2008 financial crisis, according to data from JPMorgan.
New debt deals from highly rated companies also fell short of expectations, according to BofA.
BofA said April finished with about $104bn in new debt deals for US companies with investment grade credit ratings, at least $15bn below the bank’s expectation of $120bn to $130bn. May should mark a return to normal, with $130bn to $150bn in projected supply, the bank said.
The premiums paid by issuers to investors for taking on risk relative to government debt, known as “spreads,” have retreated substantially, but not entirely, from early April peaks, after hovering near historically low levels early in the year.
Although the investment-grade bond market was more resilient last month than the marketplace for riskier debt, some bankers said higher-rated companies that need to refinance debt should aim to do so soon.
“We are advising our clients to go now, because markets are very constructive,” said a second banker, who works with companies that have investment-grade credit ratings.
Will Smith, director of US high-yield at AllianceBernstein, said it would make sense for companies to take advantage of current debt capital markets conditions, “unless they have a lot of conviction that things are going to improve”.
“In our view, companies are supposed to take capital when it’s available for them, not when they absolutely need it,” Smith said.
An influx of new corporate debt in early May would hit markets right as outflows from US funds have started to slow from historic levels.
Investors pulled a record $15bn from corporate debt-focused exchange traded funds in April, selling out of funds that highly rated debt, junk bonds and leveraged loans at nearly equivalent levels, according to State Street Global Advisors.
Flows in late April showed signs of reversing and turning positive again, indicating that investors may now be more open to take on risk. But even though May is generally expected to be calmer, market participants are still bracing for surges in uncertainty as time ticks on towards the end of Trump’s 90-day pause in early July.
“It’s hard to call it stability,” said Masaya Okoshi, a fixed-income trader at Wellington Management. “It’s like the eye of a storm.”
