As the U.S. approaches the July 9 expiry of Trump’s 90-day tariff pause, bond investors are showing renewed confidence in high-yield debt, diverging from the panic seen after April’s “Liberation Day” announcement.
📉 Back in April, high-yield credit spreads hit 2-year highs, but since then have tightened by 149 bps, reflecting stronger market sentiment (ICE BofA data).
💬 Fund managers now expect any trade impasse to lead to negotiation, not disruption. Deutsche Bank’s Sandeep Desai notes: “There’s always a policy put — just like post-Liberation Day.”
📈 Contributing factors to the bullish shift:
Trump’s softer 20% tariff deal on Vietnamese exports eased fears.
Investors believe fundamentals remain sound, even amid geopolitical tensions.
35% of U.S. junk bonds are now backed by collateral (vs. 20% five years ago), improving recovery prospects (Penn Mutual).
Yields between 7%–8% are seen as sufficient to offset risk.
💵 Flows & Supply:
April: $8.42B outflows from U.S. high-yield funds.
May–June 25: $13B inflows.
$149.8B in new issuance YTD vs. $165.5B last year (JPMorgan), signaling a supply-demand imbalance.
👉 Some investors, like Neuberger Berman, are even ready to allocate more to junk bonds if spreads widen slightly this week.
