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2026-04-08 11:13:25
[The escalating conflict in Iran is causing signs of strain in the US short-term credit market] 1. As the conflict continues in the Middle East, subtle pressures are emerging in the US short-term credit market, potentially exacerbating liquidity risks. In recent weeks, short-term credit spreads have widened, reflecting market concerns about a prolonged conflict and a general increase in risk aversion. 2. Signs of strain have appeared in the approximately $1.5 trillion US commercial paper market. The spread between AA-rated non-financial corporate 30-day commercial paper and SOFR has widened from zero before the war to 6 basis points; the spread for A2/P2 rated non-financial issuers has widened from 17 basis points to 44 basis points, indicating a deterioration in credit conditions. 3. The $2 trillion floating-rate bank note market is also facing some pressure. JPMorgan strategists stated that commercial paper buyers are currently taking a wait-and-see approach, awaiting clearer signs of stabilization. The assets of high-quality money market funds have fluctuated recently, declining 2% to $1.246 trillion in the week ending April 1.
