Credit Markets Are Betting That Tariffs Don’t Stick: Macro View

Debt markets were jolted from months of complacency by trade war escalation. The resulting orderly repricing of bonds and loans shows credit investors betting on more policy U-turns as the global tariffs order shifts.

• Corporate debt risk gauges flared this month by the most since the depths of the pandemic in 2020. The current environment is arguably more perilous than five years ago, when the Federal Reserve bailed everyone out, yet spreads are off April peaks and far from screaming distress.
• As stocks got pounded, sanity was merely restored to credit, which has long traded unsustainably tight to fair value. ...