(Bloomberg) -- Waiting three days to see whether he U-turns before making trades. Rushing bond sales through before he wakes up and starts posting. Shifting lending to tariff-proof tinned-food producers or cellphone providers.
These are all ways that battle-scarred credit investors and bond arrangers are desperately trying to navigate the constant barrage of policy bombshells from President Donald Trump’s social-media account.
More than a dozen lenders and debt bankers spoken to by Bloomberg, most of whom asked to stay anonymous discussing commercially sensitive information, said they’d been forced into a series of defensive moves after many were burned by initial efforts to treat Trump’s pronouncements with full seriousness.
When he posted about a 200% tariff on European wine, for example, a host of investment banks started doing over-the counter trades on potentially affected companies at below market price to get ahead of the crowd, according to a person with knowledge of the situation. This included the bonds of packaging specialists Ardagh Group SA and Verallia, and Italian label maker Fedrigoni SpA.
But in a few days, the downward lurch in these bond prices was completely erased after it became clear the threat wasn’t real. When tariffs were announced there was no mention of wine.
It wasn’t an isolated case in credit markets as Trump negotiates via social media and “floods the zone” with often contradictory messages. A threat to impose 50% tariffs on Canadian steel was also swiftly abandoned.
Some banks and investors have started adopting a “72-hour rule” after all Trump missives, according to three senior debt financiers, believing that a policy might actually come into place if he still hasn’t changed tack by then.
Markets whipsawed last month after Trump said he’d impose once-in-a-century tariffs on allies and enemies alike. A savage selloff, particularly in US stocks and Treasuries, pushed him to pause for 90 days on all countries other than China, triggering a relief rally that helped wipe out some, but not all, losses.
“We don’t act immediately anymore because there’s always the risk of a reversal. I think we’re becoming immune to some of it,” said Catherine Braganza, a portfolio manager at Insight Investment, who pointed out that Europe’s junk-bond market has recovered almost entirely after suffering one of the worst routs in years in early April.
Credit has rebounded more than other asset classes but it’s still impossible for corporate-debt buyers to assume that will remain the case — cranking up the pressure on a crucial source of business investment just as economists estimate a 45% chance of a Trump-induced recession over the next year.
S&P Global Ratings has even started adding a note to many of its assessments of borrowers’ creditworthiness, citing the “high degree of unpredictability around policy implementation by the US” and warning that as a result its “baseline forecasts carry a significant amount of uncertainty.”
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Being in non-US timezones can open up a route to surviving the wild policy swings. In Europe, bankers are accelerating the bond-sale process to try to have details wrapped up and investors locked in before Trump wakes up and starts posting. And to stay ahead of volatile US markets that can derail sentiment.
“Everyone is acutely aware of the 24 hours of headline risk with the frequency increasing during US hours,” said Matteo Benedetto, Morgan Stanley’s EMEA co-head of investment grade syndicate. “It’s definitely better to wrap up a deal before the New York session starts.”
Irish telecoms company Eircom Finance DAC announced a bond sale, held investor calls and priced the deal all on the same day, a rare event in the junk market. Higher up the ratings spectrum, luxury titan LVMH Moet Hennessy Louis Vuitton SE set the final terms of a €1.9 billion ($2.15 billion) two-part deal before 1pm local time, locking them in before the US market open. That’s a degree of urgency not usually warranted for a blue-chip giant.
“We’re having to be thoughtful with regards to market exposure and prioritizing the efficiency of the process and timeline of execution; having to work with the two market opens in Europe and the US,” said James Cunniffe, HSBC Holdings’ head of corporate- and structured-debt capital markets syndicate for Europe.
With many companies — running from General Motors and Mercedes to McDonald’s and Procter & Gamble — either pulling earnings guidance or reporting lower sales, some debt investors are turning to non-cyclical, everyday businesses, better able to survive a lasting shift in American tariffs. Braganza’s firm Insight is looking at anything from tinned-tomato producers to cellphone service providers.
“People don’t stop cooking because of tariffs, and they’re not going to get rid of their mobile phones,” she said.
Others say debt buyers need to get back to basics by focusing on business fundamentals and core valuations, although that’s easier said than done when supply chains are so intertwined. PepsiCo has lowered its 2025 forecast and is facing higher supply-chain costs because of tariffs.
Reacting to Trump’s posts is “more of an art than a science,” Fabiana Fedeli, global chief investment officer for equities, multi asset and sustainability at M&G Investments, said at a recent roundtable event.
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