Bank funding markets shrug off Trump’s tariff shocks and volatility
As the “TACO” trade calms markets, private debt demand is driving down funding costs for smaller lenders like MONEYME amid global volatility.
Despite ongoing market volatility, bank funding markets have largely shrugged off the chaos of Donald Trump’s trade wars and the whiplash of the so-called "TACO" trade.
In the days following Trump’s “Liberation Day” announcement of sweeping and arbitrary tariffs across much of the global economy, debt markets — including those for bank debt — froze, with issuers and investors fearing another major dislocation reminiscent of the Covid pandemic or even the global financial crisis.
But the impact has, to date, been short-lived.
“[Funding] spreads have recovered from post-Liberation Day widening, which drove three year major bank [floating rate not] senior unsecured spreads about 12 basis points wider,” National Australia Bank head of credit research Michael Bush told Capital Brief.
While the establishment of the “TACO” trade — coined by the Financial Times’ Robert Armstrong as an acronym for “Trump Always Chickens Out” — has helped smooth volatility more broadly, a more unexpected long-term trend has been improving conditions for smaller banks and non-bank lenders.
