Sign Up
Sign Up

U.S. Risky Debt Funds Hit by Record Outflows as Trump’s Tariffs Shake Markets

Investors are rapidly pulling out of high-risk U.S. assets—particularly junk bonds and leveraged loans—following former President Donald Trump’s sweeping new tariff announcements. The move has shaken global financial markets and sparked fears of a looming economic recession.

Record Outflows Amid Growing Recession Fears

In the week ending Wednesday, investors withdrew $9.6 billion from U.S. high-yield bond funds and $6.5 billion from leveraged loan funds—both record highs, according to data from LSEG Lipper and JPMorgan.

The sell-off began after Trump’s April 2 announcement of major tariffs on several countries, including a 145% levy on Chinese imports. Although markets briefly rallied after Trump temporarily paused retaliatory tariffs on some nations, panic quickly returned as investors grasped the severity of the policy’s impact.

Ông Trump thừa nhận cái giá của đòn thuế - Báo VnExpress

Riskier debt like junk bonds and leveraged loans is particularly vulnerable during economic uncertainty, as borrowers often have weaker financial profiles. David Forgash of Pimco noted:

“We expect default rates to rise in the leveraged loan market… This makes investors, including ourselves, less tolerant of risky credit amid rising uncertainty.”

Flight to Safety as Market Sentiment Sours

While the market hasn’t descended into chaos like during the COVID-19 crisis, experts say the sheer scale and unexpected severity of the tariffs have taken many by surprise.
Matthew Bartolini of State Street commented:

“It wasn’t a surprise that tariffs were coming—it was the intensity that shocked us.”

Investors have swiftly rotated out of ETFs holding risky credit and leveraged loans into safer fixed-income funds, such as government bonds, inflation-protected securities, and ultra-short duration debt.

Thuế quan là gì và những vấn đề liên quan đến thuế quan

Morningstar’s Bryan Armour and Ryan Jackson observed:

“Credit-risk-based ETFs have been overlooked.”

Meanwhile, the “spread” between junk bonds and U.S. Treasuries—reflecting how much more borrowers must pay for their lower credit ratings—rose from 2.9 percentage points in January to over 4.4 this week, the highest level since late 2023, according to ICE Bank of America.

Corporate Credit Resilience Faces Challenges Ahead

Despite the heavy outflows, corporate credit metrics have shown some improvement. According to JPMorgan, the leverage ratio for loan issuers fell to 4.78x in Q4 2024, the lowest level since the pandemic and a significant drop from 7.71x in early 2021.

Tín dụng doanh nghiệp là gì? Quy trình cấp tín dụng 2024

Still, analysts warn this trend may reverse if the U.S. economy slows. Nelson Jantzen of JPMorgan stated:

“We believe credit fundamentals could continue to improve for another quarter or so, but U.S. recession forecasts in the second half of 2025 may start weighing on the outlook.”

Conclusion

Trump’s new tariffs have triggered a sharp shift in investor sentiment, driving capital out of risky assets and toward safer instruments. While credit markets remain relatively stable for now, the trajectory of the U.S. economy in 2025 will be key in determining whether this is a short-term correction or the start of a deeper downturn.

🔗 EXPLORE MORE LATEST NEWS RIGHT HERE!

DON’T MISS OUT, CLICK AND READ NOW!

🌍 Finance Solutes
  • t.me/finance_solutes
  • Website: https://finance-solutes.com
  • Hotline: +1 929 5636 439 ( Hotline )
  • 26 Broadway, Suite 934, New York, 10004, US