US credit risk gauge shows fear rising as tariffs loom this week

A gauge of credit risk rose on Monday as looming tariffs stoked concerns of an economic slowdown and stock markets fell.

The spread on the Markit CDX North American Investment Grade Index, which rises as perceived credit risk climbs, jumped about 2.3 basis points, or 0.023 percentage point, to 63.6 basis points as of 8:51 a.m. New York time, the highest on an roll-adjusted basis since August 2024.

The junk CDX Index, which falls as credit risk increases, fell 0.4 point to 104.8, the lowest on a roll-adjusted basis since August.

The risk that tariffs will hurt the global economy has pushed the S&P 500 5.1% lower in the first quarter through Friday, which would be the worst for any quarter since 2022. Planned 25% tariffs on auto imports expected to come into effect on April 3 could weigh on profit margins for carmakers, hitting credit quality and making it harder for the riskiest companies to refinance.

The auto levies made it clear that tariffs won’t be as moderate as investors had hoped for, at least as it relates to autos, JPMorgan Chase & Co. strategists including Eric Beinstein wrote in a note on Monday. JPMorgan auto analysts expects car prices to rise by around 5%, a jump that’s expected to show up in inflation figures over the next few months.

“Over the weekend comments from the Administration suggest that this week’s tariff decisions may surprise markets on the high side of expectations once again,” wrote the analysts.

The tariffs are already weighing on corporate bond spreads. Junk spreads widened 18 basis points Friday to 340 basis points, the highest since August. High-grade risk premiums widened 2 basis points to 93 basis points.