Important Sign of Increased Risk Appetite! US Junk Bond Market "Thaws" with First New Issuance since April Tariff Storm

With the stabilization and rebound of the US credit market from the volatility triggered by Trump's tariff policy, the US junk bond trading market welcomed new junk bond issuance for the first time in nearly two weeks. Venture Global Plaquemines LNG's issuance of junk bonds worth up to $2.5 billion reopens the financing gate for the junk bond market. This also marks the first junk bond issuance since April by the Trump administration's global tariff policy, signaling a significant increase in the overall "risk appetite" in the financial market since the global "tariff storm," which is favorable for risky assets like stocks to enter a rebound trajectory. According to insiders, Venture Global Plaquemines LNG, one of the largest liquefied natural gas (LNG) export facility developers in the US, issued $2.5 billion worth of senior secured bonds in two tranches for debt refinancing. The junk bond issuance size was increased from an initial $1.5 billion to $2.5 billion, with $500 million additional issuance for each of the 8-year and 10-year bonds. The insider revealed that the 8-year bonds were issued at face value with a yield of 7.5%, and the 10-year bonds were also issued at face value with a yield of 7.75%. Early pricing guides indicated that the yield range for the 8-year bonds was initially set at the mid-to-high 7% range, while the 10-year bonds were about 25 basis points higher. In terms of credit ratings, the three major international credit rating agencies all gave the company bonds a "junk" rating, with Moody's rating the bonds as Ba2, Standard & Poor's as BB+, and Fitch as BB. This implies that the bonds issued by the company are sensitive to changes in economic or financial conditions, which may increase the risk of default and have significant speculative characteristics. Compiled institutional data shows that with the significant increase in market risk appetite, not only has the US stock market and bond market shown signs of stabilization and rebound, but the widespread rise in the junk bond market has also driven BB-rated junk bonds to their largest single-day increase since December 2023. In terms of usage of funds, the funds raised from Venture Global Plaquemines LNG's junk bond issuance are expected to be used for cash repayment of the company's existing borrowings under credit lines. Typically, junk bonds (or Junk Bonds), also known as high-yield bonds, refer to bonds with credit ratings much lower than "investment-grade" high-yield bonds. According to the rating systems of Standard & Poor's and Fitch, bonds rated lower than BBB- are considered junk bonds, while according to Moody's, bonds rated below Baa3 are considered junk bonds. These high-yield bonds are usually issued by companies with poor financial conditions or emerging non-profitable businesses, carrying a higher risk of default, thus requiring higher bond yields to attract investors and compensate for the additional higher risk they bear. Junk bond issuance resumed - an important signal of the rebound in market risk appetite Trading and issuance statistics in the US junk bond market show that this is the first breakthrough in leveraged financing in the primary market since President Trump announced the global "equal tariffs" policy that continued to ravage global stock and bond markets on April 2. The last new bond issuance was additional debt financing conducted by Patterson Cos Inc. for products in pet and livestock production acquired by Patient Square Capital on that day. Venture Global, a developer of LNG export facilities, issued a massive bond offering at a time when junk-rated bonds had the second day of the largest single-day increase in 16 months. In terms of bond underwriters, Mizuho Financial Group served as the lead bookrunner, with Banco Bilbao Viscaya Argentaria of Spain, Royal Bank of Canada, and Canadian Imperial Bank of Commerce participating. Based on the financial market pricing curve, the reopening of the junk bond market issuance model and the significant price increase in junk bonds indicate a strong demand for risky assets among investors, with the so-called "risk appetite" in the financial market significantly increasing. An increase in risk appetite refers to investors preferring riskier assets, such as stocks, while a decrease refers to preferring fixed-income assets, such as government bonds and money market funds. When risk appetite is on an upward trend and near its peak, riskier assets (such as stocks) often receive a larger premium, boosting asset prices. Conversely, when risk appetite is on a downward trend and at its bottom, the prices of risky assets may continue to be under pressure. Amid signs of stabilization and recovery in risk appetite in the financial market, the price trends of risky assets such as stocks, cryptocurrencies, and high-yield bonds have continued the significant rebound momentum seen since last Wednesday and Thursday, reflecting a reduced concern about the Trump administration's so-called "equal tariff" related worries and driving a recovery of risky assets. A tweet released last Wednesday during US Eastern time hinting a rational turn in the Trump administration's tariff stance can be said to have driven global stock markets, including US stocks, from an ICU state to a KTV party, with technology stocks like Nvidia, Apple, and Tesla rebounding most visibly. Trump indicated that he had authorized a 90-day "equal tariff deferral" measure for most countries globally, during which the tariffs on these countries would be significantly reduced to 10%. The "tariff storm" almost single-handedly stirred up by Trump caused the evaporation of trillions of dollars in global stock markets, pushing Wall Street traders and global financial market investors to the brink of despair and collapse last week. However, after Trump released the latest news of a temporary suspension of "equal tariffs" globally on his social media platform Truth Social last Wednesday, it led to a super rebound in US stocks and other global stocks, making Wednesday a "miracle day" for US stocks and leading to an epic surge in global stock markets.