13 hours Ago By BNNBloomberg
Europe’s key gauges for fear in credit markets show just how nervous investors are getting about what Bank of America Corp. analysts are calling the “the biggest shock to global trade in modern times.” U.
S. President Donald Trump’s sweeping tariffs sent indexes that track credit default swaps, a hedge against the risk of default, surging to their highest levels since November 2023. It’s been a particularly damaging time for the CDS of junk-rated firms, with the iTraxx Crossover index rising the most on an intraday basis since the collapse of Credit Suisse in March 2023.
“High-yield flows are turning negative and folks are in clear-out mode before the weekend and payrolls,” said Simon Matthews, a senior portfolio manager at Neuberger Berman. “After the ugly close last night state side, some are catching up in Europe credit.” Auto suppliers led the move downwards, with Nanterre-based Forvia SE’s euro bond due June 2031 poised for its biggest fall on record, according to Bloomberg-compiled prices.
ZF Friedrichshafen AG and Standard Profil Automotive GmbH also saw their bond prices drop sharply on the day. The declines within the European junk-rated index were led by the companies most affected by tariffs, but also by the worse-quality names which investors had already concerns about. Among the biggest losers, were EQT’s French laboratories business Cerba, as well as Emeria, a real estate company.
Both have already been under the spotlight because of their heavy debt piles. Junk credit markets had been relatively insulated from the pain being felt in stocks as concerns rose over the impact of trade levies on the global economy. Investors argued that the hefty yields on offer in a high-rate environment offered protection from the worst of the volatility.
However, the tariffs sent shock waves through global markets on Thursday, with the S&P 500 suffering its worst trading session in five years and junk bond spreads spiking globally, but most notably in the U.S. S&P 500 market updates here The risk of a trade war is also rising as countries decide how to respond to the levies.
China plans to impose a 34 per cent tariff on all U.S. goods from April 10, according to local reports.
The nerves continued on Friday with the iTraxx Crossover index of junk-rated and investment-grade European credit default swaps rising by over 50 basis points at one stage. The risk of a recession in the U.S.
have risen to at least 50 per cent, Apollo Global Management Inc. President Jim Zelter said on Thursday while money markets have increased their expectations for rate cuts there. “Everyone is stunned by what is happening,” Benjamin Sabahi, head of credit research at Spread Research.
“The consequences generally speaking for the credit market is that inflation is likely to be back and revenues expectations adjusted downward at issuer level.” --With assistance from Giulia Morpurgo. ©2025 Bloomberg L.
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