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De-liberation day — What do Trump’s tariffs mean for European HY?
Ameeq Singh
+Matthew Hughes
+ 1 more
•9 min read
9fin subscribers can access a copy of this article on the platform here.
US president Donald Trump’s tariffs, which he announced last night (2 April), are shaking up global markets. Some measures — such as tariffs on autos, steel and aluminium — were largely anticipated, but other reciprocal tariffs targeting Vietnam and the broader Southeast Asian region came as a surprise.
European high yield credits are certainly not shielded, and manufacturers that recently shifted focus to these regions will be deliberating what their next move should be. Below, we explore which industries and credits could be most impacted.
Unsurprisingly, the initial reaction has been negative, with the iTraxx Crossover widening 22bps to 350bps, while the CDX HY is out 27.75bps on the day, sailing past 400bps. Both are at their widest prints in over a year.
Source: IHS Markit. Note: Red line indicates CDX HY, Blue line represents ITX Crossover
“Local companies have reduced their premium, while cyclical companies are 20bps wider on average,” said a buysider.
According to 9fin data, the materials sector has experienced the largest declines — including names in the chemical and packaging industry. Consumer discretionary names have followed, featuring automotive manufacturers and suppliers.
The biggest bond movers can be found using 9fin’s screener here.
Source: 9fin.com
Primary markets have also shut down for the week. Miller Homes managed to price E+425 SS FRNs yesterday, but some buysiders commented they received higher allocations than expected.
"We have some deals lined up, some divi recaps, some refinancings,” said a sellsider. “But we're not risking issuing this week. We're hopeful next week there's some clarity on impacts, things have been digested, and we can launch."
Clarity is exactly what management teams want now. However, tariffs have likely been on their minds for some time, as evidenced by the number of mentions in earnings transcripts.
The tariff headlines are likely far from over, and we’re yet to see any retaliation.
“The counter-tariff is the main potential negative headline that still has to hit the tape, but all in all, it's not going to have a direct impact from a lot of the leverage finance players,” said a second buysider. “Different story for investment grade players because they tend to be more global with operations in Europe which serve the US.”
A rundown on the announced tariffs can be read in detail here, while the analysis below aims to look at credits impacted in the leveraged finance universe.
We used the 9fin doc search and global AI tools to search for potential candidates.
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