UBS cuts bond, loan sale outlook by US$235 billion on trade tumult

[NEW YORK] UBS Group lowered its forecast for US corporate debt issuance this year, citing volatility tied to US President Donald Trump’s tariff rollout and a slower-than-expected pace of dealmaking.

The bank’s research arm cut its estimate for blue-chip debt sales by US$100 billion to US$1.4 trillion, strategists led by Matthew Mish wrote in a report. It now sees US$250 billion of junk-bond issuance, down from US$310 billion prior, and US$400 billion in leveraged loan sales, versus US$475 billion previously.

Tariff turmoil froze corporate debt sales last month as the new issue market went days without a single offering.

Banks were left on the hook for a handful of financings after failing to syndicate deals to investors, while money managers pulled billions from credit funds as they dialled back risk.

Trade war uncertainty has also weighed heavily on the pace of mergers and acquisitions, the strategists wrote, most of which are financed via debt markets.

The gross supply of high-yield bonds has fallen 31 per cent year to date to April versus last year, according to the report, while leveraged loans are down 21 per cent and investment-grade debt has slumped 7 per cent.

While a flurry of transactions have come to market in recent days as companies look to take care of funding needs before the next bout of volatility, the UBS strategists expect corporate debt sales to remain lower than previously anticipated in the months ahead. BLOOMBERG