CORPORATE bond spreads have widened for eight trading sessions in a row, the longest period of ballooning spreads in over a year, as investors turn defensive amid rising fears about the impact of tariffs.
Yield premiums on a Bloomberg index of investment grade corporate bonds rose to 90 basis points on Friday (Feb 28), wiping out a move tighter earlier this year. That cemented the index’s longest streak of widening spreads since October 2023, according to data compiled by Bloomberg.
The move came as investors increasingly worry about US President Donald Trump’s combative approach to trade. US tariffs against Canada and Mexico are due to come into effect on Tuesday, while restrictions against goods from China – which has threatened to respond – raise the risks of a tit-for-tat trade conflict.
“In most of our investor meetings, much of the discussion centered on trade tariffs,” Goldman Sachs credit strategists including Kenneth Ho wrote in a recent note, following meetings with investors in the Middle East. “Investors were generally risk averse, with most preferring safer and more liquid credits.”
Worries about trade tensions have been exacerbated in credit markets because valuations are stretched, following a broad rally earlier this year.
Investors could get a reprieve this week. Chinese policymakers are meeting in Beijing for an all-important political gathering, where they are expected to unveil stimulus that could boost confidence. There is also a chance that the White House will push back the tariffs against Canada and Mexico, following an earlier delay.
Spreads on Asian high-grade dollar bonds were tighter by at least one basis point on Monday, according to credit traders.
Spreads on US corporate bonds increased seven basis points last week, and are wider by the same margin so far in 2025, a Bloomberg index shows. Meanwhile, yield premiums on Asian corporate notes widened three basis points last week, although they are still 12 basis points tighter this year. BLOOMBERG