The TwentyFour Blog

Thus far in 2025, the prevailing and overriding topic of conversation amongst economists and market participants has been tariffs and what they might mean for the global macro outlook. Not surprisingly, as we wrap up first quarter earnings season, tariffs have also emerged as the primary focus of CEOs and management teams of US corporates at the micro level.

European banks are coming to the end of the Q1 2025 reporting season, and on the surface there are multiple headwinds to contend with. Interest rates – generally a significant factor in banks’ earning potential – have come down from peak levels, and economic uncertainty has been heightened by somewhat inconsistent trade rhetoric from the US administration.

With much fanfare, President Trump and Prime Minister Starmer announced a “historic” trade deal between the US and UK on Thursday. The main points for the UK are a reduction in auto tariffs from 27.5% to 10% for the first 100,000 cars that enter the US, and the removal of steel and aluminium tariffs.

April was one of the most volatile months across financial markets in recent memory, triggered by President Trump’s sweeping tariff announcement on April 2. While much has been written about the geopolitical and economic implications, here we will focus on how equity, credit and rates markets have adjusted following what was a sharp sell-off and subsequent recovery.

The Bureau of Economic Analysis (BEA) published its first estimate for Q1 US GDP growth, which at -0.3% was slightly worse than the Bloomberg consensus of -0.2% on a quarter-on-quarter (QoQ), seasonally adjusted, annualised basis. While the headline of the US experiencing negative growth looks quite bad, the detail of the report looks much better.

The high yield bond market reopened in Europe last week after a three-week hiatus triggered by the US tariffs fallout. Aside from a private placement by Very Group on April 10, the last public European high yield deal was from UK homebuilder Miller Homes on March 31, so we were interested to see how the first post-tariffs deal would be received.

With a week currently feeling like a long time in geopolitics, the European sovereign crisis at the beginning of the last decade feels even more like a distant memory. The road to recovery for Europe’s periphery economies has been long and windy, but post-Covid it has been surprisingly smooth.

Markets settled down last week thanks to the absence of headlines around tariffs. There is a universal acceptance that uncertainty and volatility will remain, though a series of constructive data prints relating to inflation and labour markets have now been navigated, and investors are shifting their focus to how central banks will weigh up the growth and inflationary impact of tariffs at the next round of meetings.

Last week was one of the most volatile on record. President Trump's announcement of a 90-day pause in reciprocal tariffs for every country bar China sparked one of the largest rallies in equity indices in recent history.

With the market focus over the last week or so being firmly on equities and credit spreads, it is worth zooming in on developments in the European bank credit default swap (CDS) market.

While much of the focus in private credit has been on direct lending, Significant Risk Transfer (SRT) is emerging as a compelling alternative. What began as a regulatory tool is now gaining traction with a growing investor base, as banks look to optimise capital and issuance reaches record highs.

“Liberation Day” has landed, and not with a whimper. In extraordinary scenes in the Rose Garden of the White House, President Trump held up a board outlining the level of tariffs the US will impose on countries around the world, and in most cases they were worse than worst-case expectations.