Leverage finance markets cheered Donald Trump’s win on the prospect the former president’s return to the White House will unleash deregulation and M&A, lower taxes and higher economy growth. The president-elect’s favorite word, tariff, is expected to selectively impact companies and sectors.

“Overall, I think the election outcome and Trump in general are good for the economy, credit markets and risk appetite,” said one buysider. “When it comes to strategy and our investment portfolios, I think we’ll be looking to get higher yields.”

After media outlets declared Trump the presumptive winner early Wednesday, the yield on the 10-year Treasury notes shot up to 4.47% before settling at 4.43% in afternoon trading. All major stock market indices continued to rise Wednesday with the S&P 500 closing up 2.53% after rising 1.2% on Tuesday.

Treasury yields gained on expectations the US will see “higher nominal GDP growth and higher fiscal deficits,” according to UBS analysts.

Along with Trump’s win, Republicans are set to regain control of the Senate from Democrats. Votes continued to be tallied in races that will decide which party controls the House of Representatives.

“The bond market will likely remain the focal point for price action,” said Laura Cooper, a global investment strategist at Nuveen. “Markets must contend with a potential fiscal injection at a time of economic strength and the inflationary implications could drive US yields higher with the curve bear steepening in early price action.”

From a new issuance perspective, the changes in base rates could lead to companies rethinking whether they’ll tap the market to raise new money in the immediate aftermath of the election, according to another buysider.

“In the near term, it would benefit investors who are trying to lock in higher yields, but the longer rates remain high, this will hurt the economy and borrowers, as well as [the competitive advantage of private credit] compared to the broadly syndicated market,” he said.

“[Inflation] will of course harm borrowing rates, making it more costly to raise new money [for mergers],” the first buysider agreed. “But given the crackdown on M&A from the Biden administration and the FTC, from a regulatory perspective it could be net positive since Trump could open up that side of the market.”

The election results come a day prior to a meeting tomorrow of the Federal Reserve’s Open Market Committee where the Fed is widely expected to cut rates by 25bps. “Our rate cut forecast is not changing based on election results,” a bank economist said.

Solar power hit

During the campaign, Trump and other Republicans repeatedly attacked current president Joe Biden’s signature Inflation Reduction Act that offered subsidies to renewable energy developers. The act spurred massive construction in the space, but Trump has argued the subsidies drove inflation and has said he would claw back unspent IRA funds.

Solar companies were quick to take a hit after the election. Sunnova Energy’s USD 400m 5.875% senior unsecured notes due 2026 traded down from 90 on the day of the election to 86.5 early this morning. The issuer’s USD 400m 11.750% senior unsecured notes due 2028 also slipped from 84.5 to 80, according to MarketAxess.

SunRun also took a hit in the wake of Trump’s victory. The solar panel company’s USD 475m 4.00% convertible senior notes due 2030 fell from 129.35 on Election Day to 108.92 this morning.

Both SunRun and Sunnova have been beneficiaries of the IRA. John Berger, Sunnova’s CEO, acknowledged “uncertainty” from investors tied to the outcome of the election, but played up the bipartisan appeal of elements of the IRA to assuage some of these concerns.

Industrials rally, retailers hit

Industrials enjoyed a strong rally as Trump’s promise of sweeping tariffs on imports—particularly from China—sparking optimism in the domestic manufacturing sector, though concerns remain over higher consumer prices and global supply chain disruptions. The Vanguard Industrials Index Fund ETF jumped over 4% on Wednesday.

The president-elect promised across the board tariffs of 10% to 20% on all imports coming into the United States as well as massive 60% tariffs on goods from China.

GrafTech – a US-based maker of electrodes for lithium batteries – saw its stock rise 15%, while its USD 500m 4.625% secured notes due 2028 have gradually traded up over the past month, changing hands at 70 on 4 November versus 66.5 on 7 October, according to MarketAxess.

The pain borne by firms from tariffs would not be evenly distributed, said a sellside credit analyst. For smaller manufacturers, tariffs that block out foreign competition could be a boon, while larger manufacturers with global supply chains would be hit with higher input costs.

While many economists are skeptical about the benefits of tariffs on the economy, some market participants believe Trump’s proposal has merit.

“Tariffs are like diets, painful at first and no immediate results but if you stick with it, you will see the benefits – I also think tariffs will bring more manufacturing to the US,” said another sellsider, who predicted tariffs will spur more foreign car companies to produce more models in the US.

Retailers reliant on China could also be negatively impacted, but many could also shift operations to cheaper locales like Bangladesh to dodge these larger tariffs, added the first sellside credit analyst.

Crafts supplier Michaels is heavily reliant on the Chinese market and imports around 65% of its goods from the country which could be subject to tariffs, according to a buysider. The issuer’s USD 1.3bn 7.875% unsecured notes due 2029 traded down three points to 51 this morning, according to MarketAxess.

Online home décor retailer Wayfair’s stock fell 10.8%, while its USD 690m 3.25% notes due 2027 dropped five points today to 101.

Private prison operators, meanwhile, are one sub-sector traders are jumping on as a potential beneficiary of Trump’s proposal to deport large numbers of illegal immigrants.

The Geo Group shares have jumped 37% since yesterday, while its USD 649m 8.625% notes due 2029 jumped two points to 106 this morning, according to MarketAxess. The company’s USD 624m 10.25% notes due 2031 also climbed two points to 108 today.

Rival CoreCivic’s stock gained 28% today and its USD 500m 8.25% notes due 2029 ticked up slightly to 105.9 today from 105.1 on 5 November.

Optimism for media M&A

Levered media groups may be another beneficiary of the Trump win. After racking in millions of dollars from political advertisements, companies and their investors are now optimistic that a second Trump term will open up the potential for consolidation among struggling broadcasters.

“[Under Trump] people think that the broadcasting sector would be a big beneficiary,” a buysider said, adding that a potential Trump administration might allow more M&A activity and there might be less issues with the ownership limits imposed by the Federal Communications Commission.

A sale may be distressed radio company Cumulus’s only option to address its balance sheet following an earlier liability management exercise, the buysider noted.  The issuer’s illiquid term loan and bonds continue to trade at distressed levels.

“A Trump win would usher in greater deregulation,” said E.W. Scripps CEO Adam Symson during the broadcaster’s 3Q24 earnings call on 4 November. “We could see new opportunity for the industry for further consolidation in the broadcast industry, something that I frankly think is important for the industry and for local journalism, and we could definitely take advantage of that opportunity.”

E.W. Scripps is currently exploring a sale of its Bounce TV cable channel, hoping to use the proceeds to help pay down and refinance 2026 and 2027 debt, as reported.

E.W. Scripps debt was down as much as 11 points on Monday after the company reported 3Q24 earnings and said the Bounce TV sale was likely pushed back to 2025. Following the election results, the issuer’s USD 550m 3.875% secured notes due 2029 gained 2.25 points, last trading at 74.5, according to MarketAxess.

Sinclair is another broadcaster who was reportedly in the market looking to divest assets. The company received interest for its Tennis Channel network earlier this year, Bloomberg reported.

Ahead of Sinclair’s 3Q24 earnings after the bell Wednesday, the media group’s USD 750m 4.125% secured notes due December 2030 were up 3.5 points, last exchanging hands at 79 today, according to MarketAxess. The USD 500m 5.5% unsecured notes due March 2030 was up around 2.8 points, last trading at 69.