This week in charts
ETF trading volumes
UK heat pump applications
German heat pump applications
U.S. heat pump shipments
S&P 500 Staples Index
S&P 500 Index performance by first 100 days of presidency
Global investors intentions: cut U.S. equities
Historical S&P 500 Index drawdowns greater than 15%
S&P 500 Index earnings outlook sharpest decline since 2020
S&P 500 revenue from China vs. U.S. exports to China
U.S. pharmaceutical drug imports from China
Valuations by region
Foreign Funds Sour on US Corporate Bonds as Trump Sows Chaos
European and Asian money managers are showing signs of losing some of their appetite for lending to US companies as trade wars heat up, in a potentially worrying sign for corporate America.
The selling comes after overseas investors made record purchases of US corporate debt in 2024. Official data shows the demand slowing in February, according to Citigroup.
There are signs of foreign investors selling US assets broadly. Data showing flows into funds that take money from overseas and buy US stocks and bonds shows a sharp drop in purchases over the past two months, according to a note from George Saravelos, Deutsche Bank’s head of foreign exchange strategy, on Monday.
At least some foreign investors are guarded about jumping back into US credit after April’s roller-coaster ride.
In early April, Trump’s proposed tariffs hit security prices worldwide, including US corporate debt, Treasuries and stocks. Prices broadly recovered after the US president paused the proposed increases and talked about negotiating agreements with individual nations.
Around 30% of US corporate bonds are owned by foreign investors, according to economist Torsten Slok at Apollo Global Management Inc. If those buyers continue pulling back, and US money managers don’t step in to make up the difference, risk premiums on the debt will have to widen, said Hans Mikkelsen, a credit strategist at TD Securities.
Investor Caution
For asset allocators outside the US, the relative-value math involves comparing yields on domestic corporate notes with debt abroad, and then adding the cost of hedging their US investments back into their home currency.
In Japan, that calculus works out in favor of domestic corporate credit, according to JPMorgan strategists Eric Beinstein and Nathaniel Rosenbaum. Hedging costs may have come down, but Japanese government bond yields have risen significantly this year, touching highs not seen in more than a decade. The growing riskiness in US corporate bonds can make credit look comparatively less interesting.
In Europe, hedging costs have surged, recently touching their highest since March 2023. They are expected to edge even higher as the Federal Reserve and the European Central Bank continue on divergent interest-rate paths, the JPMorgan strategists said. Asset managers on the continent have been dialing back their exposure to US credit in part as a result.
To be sure, many investors have global mandates, which means they will continue to buy US corporate debt even if they pare back. Demand has also remained strong for newly issued bonds in the US, suggesting broad appetite for the asset class.
For now, foreign investors appear to be on the fence about the US corporate bond market, said Goldman Sachs’ Karoui, whose been meeting investors in Asia and Europe in recent weeks.
This week’s fun finds
It’s been over a decade since Bryan joined the Finance team at EdgePoint... and we haven’t been the same since. Happy 10th work anniversary, Bryan!
To Win This Contest, Just Squawk Like a Seagull
A chorus of sea gull squawks and screeches could be heard in a seaside Belgian resort town on Sunday — but it was not coming from the birds.
Competitors from 13 countries came together in De Panne, Belgium, to see who could produce the most faithful imitation of a gull sound for the fifth annual European Gull Scream Championship.
