There is likely to be little certainty for anyone once US tariffs come into effect on Wednesday, but this week has proved that bond issues can still land in Europe's investment grade corporate market with decent terms, in the most uncertain of times.
April 2 will see US president Donald Trump roll out swingeing import tariffs across a range of sectors.
The details will not be known until around 3pm Washington time, after the European market has closed. But Trump has already promised a 25% tariff on cars and parts and 25% on steel and aluminium, sending bond spreads for companies in those sectors wider.
Wednesday was supposed to bring clarity after long uncertainty about Trump's wider tariff plans. But bankers and investors in Europe are not convinced it will, given the potential complexity of tariffs and Trump’s tendency to change terms and conditions, seemingly on a whim, often using social media to announce the changes.
But the base case is that Trump's ‘liberation day’ will be day 1 of a global trade war. The European Union, Mexico and Canada have already promised stiff retaliation.
This should be disastrous for the European corporate bond market.
It has certainly been dreadful for equities, with the S&P 500 falling 4% in the first quarter of 2025, its worst quarterly performance for years.
There has been some widening in European credit. The S&P iTraxx Europe Main index of credit default swaps closed at 64bp on Tuesday, 10bp wider than where it started the month, while the Crossover has moved out 44bp, to 330bp.
But that has not stopped the primary market from firing out deals, with more likely to come as soon as Wednesday.
French food maker Danone, Belgian telecoms company Proximus and German healthcare firm Fresenius all sold benchmark bonds on Tuesday, and bankers found it easy to call them all "good" or better.
Danone, a darling among French investors, sold an €800m 3.438% eight year April 2033 bond with a 3bp-4bp new issue concession.
This is no wider than the premium it would have been likely to pay a few weeks ago, before Trump announced the 25% car tariff, though Danone's curve itself has widened.
Others paid more pick-up, but there was never any doubt that they would get their money.
Playing the technicals
The flow of cash into euro corporate bond funds for the last 18 months to two years has not slowed, and this is providing technical support for new issues that even an imminent trade war cannot shake.
That’s not to say everything is a complete walkover. Investors weren’t particularly pleased that Danone tightened so hard, and almost €2bn fell out of the book between its peak and the final count of €2.7bn, suggesting that there is some tetchiness around the fringes, even for a defensive company in a popular maturity.
There are names lining up that will be more challenging tests of the market, in particular the first unrated deal of the year, from French publisher and travel retailer Lagardère.
This could be a tough sell, as fair value on unrated deals has become increasingly difficult to pinpoint since markets became more volatile. Many once unrated names have chosen to jump through the hoops for a rating — and often been rewarded with a great bond market reception.
But if Tuesday is anything to go by — when the world stood on the brink of a tit-for-tat trade war, yet Fresenius attracted €7bn of final orders — then Lagardère and anyone else planning deals should be confident of success.