The rating agency S&P launches an alarm on the worsening of the credit market globally, due to thenegative impact of dutiesannounced and then suspended and the consequent reaction and volatility of the world markets. This is what emerges from a report by the rating agency, following the liberation day and the events of the last few days.
Wide and deep impacts are feared on economy
Commercial tensions – underlines S&P – are putting at risk A context that has so far been favorable to credit conditions for most debtors. The announcements of April 2nd (Liberation Day) on the duties by the United States – and the next escalation of the commercial conflict with China – have far exceeded the expectations of the financial markets and the previous hypotheses of S&P. If the US duties currently suspended were fully applied, the economic consequences would be large and profound.
If the duties slow down the economic activity e rekindle inflationthis will make the waters more turbid for the monetary policy central banks. At present, S&P provides that Federal Reserve will lower its reference rate of only 25 basis points this year. In addition, the expansion of the spreads could maintain the overall financing costs high.
Volatility market markets and diffuse sales
The volatility of the markets and a growing risk aversion by investors represent i More immediate risks for credit in this context. Investors have already lowered the price of relatively risky financial assets and are requesting higher prizes For the risks that are taken.
Vix volatility indexwhich measures the fears of the market, has reached Quota 60 last April 7thupward compared to about 15 in mid -February (and remains around 40). Furthermore, the spread of the secondary market on the American debt of speculative degree have exceeded 300 basis points (BPS) For the first time since November 2023. The volatility of the market also triggered an intraday Sell-off of the US Treasury securities on April 9 and oscillations of the value of the dollar.
Uncertainty remains high
There 90 -day suspension of most duties, announced by President Trump, did not eliminate uncertainty on what could happen. The prevailing uncertainty risks further undermining the trust of companies and consumers, increasing the worry on corporate investments, employment and expenditure of consumers and economic activity in general. This lack of clarity is demonstrated by the further tightening of commercial tensions between the United States and China this week.
If the duties were confirmed …
If, at the end of the suspension, commercial tensions will remain unresolvedwe could witness a concrete impact on credit quality. The breadth and depth of the effects will depend on the duration of the duties, on the countermeasures adopted by the commercial partners of the United States and any stimulus measures implemented by the governments to compensate for the economic impact.
In the short term, the effects will affect the credit conditions, with many debtors forced to repay the loans due to higher funding costs Or, worse still, to find yourself excluded from the capital markets. In the long term, the effects will probably slow down the economic activity, further upset the global supply chains And they will chain geopolitical relationships. And they will have direct and indirect impacts on ratingin particular for the sectors and companies most exposed to global supply chains.
