U.S. corporations with weaker credit profiles are accelerating their issuance of high-yield bonds as they brace for renewed trade tensions in July, which could disrupt investor appetite and drive up borrowing costs.
According to JPMorgan, companies with risky credit ratings raised $32 billion through junk bond sales in May—the highest monthly total since October 2024. The pace shows no sign of slowing, with the first week of June already surpassing April’s $8.6 billion tally.
Bankers and investors anticipate a continued wave of new debt deals through June, capitalizing on current investor demand and a relatively calm market backdrop. However, concerns loom over the July expiration of a 90-day suspension on former President Donald Trump’s so-called “liberation day” tariffs. Market participants fear this could reignite the uncertainty that rattled markets in early April.
“You get into these patterns where the market gets into a lull and gets ahead of itself. It feels good now, but it’s setting up for some volatility in July,” said David Forgash, a portfolio manager at Pimco.
The bond market’s sensitivity to geopolitical and trade developments was evident in early April, when spreads on junk bonds—reflecting the premium borrowers must pay over U.S. Treasury yields—spiked from 3.5 to 4.61 percentage points in just one week following Trump’s tariff announcement. That marked the highest cost of borrowing for risky issuers since May 2023, based on data from Ice BofA.
Although spreads have since narrowed amid signs of progress in U.S.–China trade talks, they remain elevated compared to the historic lows seen in late 2024 and early 2025, when spreads fell below 3 percentage points.
One leveraged finance banker noted that markets have so far shrugged off not only trade friction, but also ongoing geopolitical tensions in the Middle East and Eastern Europe. However, the banker warned that further tariff escalation or a new major conflict could disrupt investor sentiment.
“I don’t think we’re going to go back to April where the market is grinding to a halt,” the banker said, “but it’s certainly going to cause spreads to be wider.”
While speculative-grade issuers are rushing to lock in funding, demand is also strong in the investment-grade space. Strategists at Bank of America project June’s high-quality bond issuance will reach $110–$120 billion—potentially the busiest June since 2021.
Kyle Stegemeyer, head of investment-grade debt capital markets at U.S. Bancorp, said borrowers are keen to strike while conditions remain favorable. “I think most issuers are coming to the conclusion that if there’s an open window and the backdrop’s attractive, why wait it out until closer to maturity?” he said.
As July approaches, the debt markets face a narrowing window of opportunity. With global tensions and policy uncertainty looming, both high-yield and investment-grade issuers appear determined to act before the next potential storm hits.
