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Recent trends in the corporate bond market suggest that US companies with risky credit ratings are moving quickly to sell junk bonds ahead of expected trade tensions in July. In May, companies with weaker credit ratings raised a staggering $32 billion through high-yield bond sales, marking the highest volume since October. The first week of June has already seen junk bond sales surpassing April’s total of $8.6 billion.
Industry experts anticipate a steady stream of new debt offerings throughout June and into July, as demand remains robust and market uncertainty remains relatively low. However, the looming expiration of the 90-day pause on Trump’s “liberation day” tariffs in early July could trigger a new wave of volatility, reminiscent of the disruptions seen in early April.
David Forgash, a portfolio manager at Pimco, warns that the market may be setting itself up for increased volatility in July, as investors react to the uncertainty surrounding trade negotiations and geopolitical conflicts. The extra costs borne by risky corporate borrowers, as measured by spreads compared to US government debt, spiked following Trump’s tariff announcement in April, reaching their highest levels since 2023.
While spreads have since retreated from their peak, they remain elevated compared to historic lows seen in 2024 and 2025. Market participants are closely monitoring developments in trade talks and geopolitical tensions to gauge the potential impact on corporate borrowing costs and investor sentiment.
Despite the uncertainty, there is strong demand for highly rated corporate credit, with investment-grade bond sales expected to reach between $110 billion and $120 billion in June. Companies are seizing opportunities to tap into favorable market conditions before potential disruptions arise from tariff escalations or tax bill negotiations.
As the market navigates through these turbulent times, issuers are advised to capitalize on windows of opportunity when market conditions are favorable. By staying proactive and agile, companies can secure funding at attractive terms and navigate the evolving landscape of global finance.
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