Are credit investors too sanguine about a trade war?

Are credit investors too sanguine about a trade war?

Neil Callanan Neil Callanan

Neil Callanan

Corporate Finance Tsar

发布日期: 2025年2月10日
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Our story from Saturday about credit investors' refusal to be rattled by the threat of a trade war proved prescient. The motivation for writing it was that prices on credit default swaps - a form of hedging - barely moved last Monday amid the turmoil of Trump threatening tariffs on Mexico and Canada. That was even as trading volume more than doubled... Were people getting too nonchalant?

CDS didn’t sell off because “credit remains a tight asset class with the most stretched valuations across the board,” said?Gabriele Foa, an Algebris Investments portfolio manager.

JPMorgan strategists in Europe meanwhile have turned bearish and have even compiled a Trade War basket of companies vulnerable to the levies.

Credit is negatively asymmetric at the moment,” Foa said. “You can pocket carry of 3% to 4% but if there’s an accident you can easily lose 10% to 12%.”

The day after publication Trump announced plans to impose 25% tariffs on steel and aluminium this week... Click here to read more: https://www.bloomberg.com/news/articles/2025-02-08/cds-spreads-are-so-tight-even-trump-tariff-talk-can-t-shift-them-credit-weekly?sref=cOxs4CFp


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