Credit Costs Soar as Investors Brace for End of Ultra-Cheap Cash

Borrowing costs are soaring across global credit markets as investors prepare for the end of an era of loose monetary policy.

In Europe, borrowing costs for the most credit-worthy companies rose above 1% for the first time since the summer of 2020. Meanwhile, the junk market’s window for refinancing at cheaper rates has now closed. And the worldwide cost of protecting against defaults for both investment grade and high-yield firms is surging.

Investors are scrambling to position for more hawkish policies from the Federal Reserve to the Bank of England and the European Central Bank as officials seek to tame runaway inflation. An unexpectedly strong U.S. jobs reading Friday added to the Fed’s case for raising rates, pushing up U.S. credit risk gauges and roiling Asian markets Monday.