A montior displays Nasdaq charts on the floor American Stock Exchange (AMEX) at the New York Stock Exchange (NYSE) in New York on April 11, 2025. Photographer: Michael Nagle/Bloomberg.
Bond dealers started demanding higher compensation for the risk of trading investment-grade corporate debt after President Donald Trump’s trade war sent volatility racing through markets, according to an analysis by Apollo Global Management Inc.
Bid-ask spreads—or the difference between the price at which dealers are willing to buy and sell the same bond—roughly doubled, to 0.2 percentage points, for less-liquid securities after Trump released his punitive tariffs on April 2, Apollo’s chief economist, Torsten Slok, wrote in a note yesterday, citing analysis from his colleague Shobhit Gupta. That pushed the cost of trading so-called “off-the-run” bonds, or deals of less than $900 million issued more than two years ago, to levels not seen since the 2020 pandemic, according to Apollo. That’s materially more than the jump for deals of $1 billion or more that were initially sold in the past year, which are known as “on-the-runs” and are more liquid.
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“Liquidity in on-the-run bonds has improved, but off-the-run paper has become virtually untradeable and effectively a buy-and-hold investment,” Slok wrote.
The recent jump marks a sharp break with what had been steadily dropping trading costs. It’s another sign of how much markets have been affected by the U.S. trade conflict, which is poised to hit U.S. businesses with higher costs and had darkened the outlook for the economy.
The bid-ask spreads, considered a good proxy for measuring the cost of liquidity, had been slashed in half in the two years through September, as a boom in electronic trading enabled more investors to buy and sell large volumes of securities faster and more efficiently.
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