US corporate bond market opens for some after tariff pause

By Matt Tracy

April 10 (Reuters) - Four companies tapped the U.S. corporate bond market on Thursday after financial markets got a brief lift from the Trump administration's Wednesday pause on tariffs on some countries.

After a week of nearly no new bond deals following President Donald Trump's 'Liberation Day' tariff announcement, at least four companies, including liquor maker Diageo Investment Corp , auto repair chain AutoZone (AZO), tobacco supplier Japan Tobacco (JAPAF) and tech supplier Keysight Technologies (KEYS) , were set to price fresh debt the day after Trump announced a 90-day tariff pause for most countries except China.

Diageo announced a $1.5 billion two-part series of five- and 10-year notes. AutoZone (AZO) also tapped the market for a $500 million five-year note offering.

They were among the first bond offerings since Tuesday's $4.2 billion bond sale by HR platform Paychex (PAYX).

Both high-grade and junk bond spreads tightened following Trump's announcement on Wednesday that he would pause his Liberation Day tariffs on most countries, while raising tariffs on China to 125%.

Investment-grade spreads last averaged 121 basis points, widening two bps to end Wednesday's trading session. Junk bond spreads, meanwhile, tightened 20 bps and closed Wednesday at 437 bps, according to ICE BofA data.

Both spreads blew out following last week's tariff announcement, widening the most in one week since the first week of the regional banking crisis in March 2023. IG spreads at one point hit their widest since November 2023, while junk spreads reached their widest since June 2023.

Analysts expected the recent dry spell in issuance following the spread widening to carry into Thursday despite the 90-day tariff pause.

"For bondholders, at a macro level the key concern lies in economic uncertainty and the potential for higher borrowing costs as companies adjust to shifting trade dynamics and unpredictable tariffs," noted Rezaah Ahmad, CEO of UK-based WiseAlpha, a corporate bond trading platform.

He expected demand to remain strong.

"However, our view is that in an uncertain environment corporate bonds are going to be a valuable alternative to higher risk and more volatile asset classes such as equities, while still offering the potential for equity style returns over the medium term." (Reporting by Matt Tracy, Editing by William Maclean)