U.S. President Donald Trump’s sweeping tariffs have brought investment-grade bond issuance in the U.S. to a standstill this week, compounding a month-long spell of market anxiety and aggressive investor pushback on bond pricing.
Since Wednesday’s tariff announcement, no investment-grade U.S. corporate bonds have been issued, marking a significant freeze in primary market activity. But bankers say the writing was already on the wall, with investor behavior showing unusual signs of distress even before the announcement.
In March, up to 60% of bond orders were canceled mid-way through book-building for some deals, a massive spike compared to the typical 10-15% drop rate. Investors reportedly pulled out when pricing shifted even slightly tighter than expected — by just 1 or 2 basis points in some cases.
“Investors are dropping out of some deals even if they are priced only one or two basis points tighter than where they want it to be,” said Teddy Hodgson, global co-head of fixed income capital markets at Morgan Stanley to Reuters.
The stress is clearly visible in the secondary markets as well. On Thursday, spreads on ICE BAML’s investment-grade index widened by 10 basis points, the biggest jump since the U.S. regional banking crisis in 2023. These spreads — the extra yield investors demand over Treasuries — are now at their widest since August 2024.
Bankers say this pushback is investors’ way of protecting already shrinking returns amid recession fears and widening credit spreads. With just 30-40% of new bond issues outperforming in current markets (versus a normal 85-90%), concerns the durability of corporate credit in the face of a possible recession are clearly intensifying.
