HY Market Weekly Minutes: Relief Rally or Dead Cat Bounce?...Powell's "Transitory" Tariff Take (March 24, 2025)
A Brief Recap of Last Week's High Yield Market Performance
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Well, that was quick. After two weeks of relentless selling, high yield bounced +0.43% last week as Powell delivered the magic word markets were desperate to hear: “transitory.” The Fed Chair’s verbal gymnastics were something to behold—recession fears dismissed, uncertainty acknowledged just enough to keep rate-cut hopes alive, and tariffs neatly packaged away as temporary noise. No wonder credit markets took the cue to pretend the previous panic never happened.
But here’s the disconnect—economic data continues to flash warning signs even as spreads tightened. February’s retail sales may have strengthened on the headline, but as Powell himself pointed out, consumer spending appears to be moderating. Yet high yield spreads tightened 4bps to 317bps, almost as if the previous week’s panic never happened.
Even more telling: the primary market didn’t skip a beat, pricing $3.8 billion across 4 deals. That’s $16 billion of supply for March despite tariff turmoil and consumer slowdown signals. When deals price through talk during a supposed growth scare, you have to question the narrative.
The sector dynamics reveal the market’s internal conflict. While high yield climbed overall, dispersion is back with a vengeance. That’s not what stability looks like. Names like Hertz (-16pts) collapsed without clear catalysts, while beaten-down retailers bounced sharply.
Has the Fed’s “transitory” label actually solved anything, or are we just witnessing another momentum-driven head fake?