A cold snap in corporate bonds

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Grainger, for the ones who get it done. I don't want to be a downer here,

but we are all going to wake up tomorrow

in a whole different economy. From American Public Media, this is Marketplace.
In Los Angeles, I'm Kyle Rizdahl. It is Tuesday.
This one is the 8th of April. Good as always to have you along, everybody.
It is possible. It's desperately unlikely, but it is possible that between the time this program gets put to bed and the time you hear it, that President Trump will have changed his mind.
That he'll have reconsidered the damage he's doing to global trade and the American economy. But we here cannot predict the news.
We can only tell you what the news is. And the news is that at midnight tonight, the president's tariffs take effect and the whole global trade ballgame is going to change.
Some of those changes actually have already started happening. Sabree Beneshaw told us yesterday about the yield on two-year Treasury notes, how it's been falling on expectations of a weaker economy over the next couple of years.
Those exact same concerns are playing out in the corporate bond market, too. Over the past couple of days, the issuance of corporate debt has slowed to a crawl.
Things are so slow that some traders are saying the corporate bond market has effectively shut down. Marketplace's Justin Ho gets us going with what that is telling us.
The problem with the corporate bond market is uncertainty. If you don't know what XYZ company's profits are going to be six months from now, you're probably going to charge more in order to lend to them.
That's Guy Laban, chief fixed income strategist at Jannie Montgomery Scott. He says companies feel it when their borrowing costs increase, even a little.
It's just like a mortgage. If you have to pay an extra quarter of a percent on a 30-year bond issuance as a company today, well, that's a lot of extra expense over the next 30 years.
It doesn't sound like much, but it's a lot. As a result, companies are holding off borrowing money by issuing new bonds.
Winnie Caesar, head of strategy at Credit Sites, says companies have been tapping other lending sources. They have access to bank lines of credit, which is basically like a massive credit card.
There's also the commercial paper market, which is another kind of short-term source of funding. Caesar says companies will start inching back into the corporate bond market, but as long as the economy remains this uncertain, she says companies won't be issuing very many bonds.
The outlook for the broader economy and tariffs and taxes and geopolitical, those are going to be the things that probably give management teams a little bit of pause. Meanwhile, any company that does issue new debt, say to refinance old debt, is going to have to contend with those elevated interest rates.
Evan Raleigh, a finance professor at the University of Connecticut, says that's going to limit what companies want to do with the money they borrow by selling bonds. They still might make the investment they think is the home run, but they might not make the investment that they're less sure about.
Raleigh says that means companies might focus on short-term investments that don't require much borrowed money, say sprucing up a retail storefront. But longer-term investments that require a lot of borrowed money? Probably not going to happen.
When you look at something, oil and gas or mineral extraction, or maybe even pharma or things that have returns that are way out in the future, those are the things that are the first to go when interest rates go up. And so a slowdown in the corporate bond market is a drag on economic growth.
I'm Justin Howe for Marketplace. Slowdown was the word of the day on Wall Street today, as in started strong, then slowed way down.
We'll have the details when we do the numbers. There's a whole bunch of ways to try to track what's going on in this economy right now.
Justin did corporate bonds just now. We'll do commodities later.
There are banks, too, about which the Dallas Fed has a data point or two. A new survey shows a sharp slowdown in both loan growth and loan demand in the Lone Star State.
Tariff-induced uncertainty was, of course,

cited as one of the major factors. Marketplace's Elizabeth Troval checked in with some lenders in

her home state today and filed this report. Starting at the border in Laredo, IBC Bank's

Jerry Schwebel says he's seen a dip in lending. His customers are importers, exporters.

Everyone's taking a pause and wait and see as to what the implementation of the tariffs will

We'll be right back. His customers are importers, exporters.
Everyone is taking a pause and wait and see as to what the implementation of the tariffs will mean to their particular companies or their particular sector. In Paris, Texas, in the northeastern corner of the state, Greg Wilson is president of Lamar National Bank, which does commercial ag and consumer lending.
He worries if tariffs stick around, construction budgets could get out of control. That is a scary concern because at that point, a bank's going to have to either continue to lend beyond what was initially contemplated in the scope or kill the project, and neither one of those are good outcomes for banks or our customers.
It's the inflationary impacts of tariffs on consumers that has InTouch credit union CEO Kent Lugrand worried. He does a lot of lending in the Dallas area, where people have already

been squeezed by rent and insurance hikes. We are seeing an uptick in non-performing loans,

mostly on the consumer side. We are concerned that if the present course continues,

that could worsen. In the Houston area, TDECU CFO Jason Schneider is more optimistic.
He thinks

some of the slowdown is seasonal and that the dust from tariffs will settle in the second half of the

year. We also know for sure on a little bit more around what the Fed's thinking.
If there is an economic storm ahead, Texas is a good place to weather it. But that also means negative indicators here could mean worse things elsewhere, says Rice University's John Diamond.
If credit is tightening in Texas, then that's probably likely going on other places.

For now, when it comes to tariffs, the eyes of Texas and the world are upon you.

In Houston, I'm Elizabeth Troval for Marketplace. One of the things that happens when you're having a job in business journalism in, shall we say, interesting times, is that people you know around town will stop you, like, at the grocery store and say, to put it politely, what the heck is going on? So we thought that might be a useful way to spend a couple of minutes of airtime.
I went out on Blue Sky yesterday and asked all y'all what's on your mind. Tariffs, the economy and everything.
Got a bunch of good questions. Here are a couple, three of them.
First of all, from Mary Peterson in Seattle. Is the U.S.
economy about to freeze up? People stop investing in the stock market, stop buying things. Countries stop doing business with the U.S.
because they can't trust what President Trump will do next. Well, the short answer, Mary, setting aside not trusting what the president is going to do is no.
The American economy is a $27 trillion beast. It is dynamic and diversified.
The fundamentals, as politicians like to say, are strong. For now.
But let's just take the stock market for one example, which, Mary, you know, assuming you're a regular listener, stock market is not the economy. But when markets go up, there is this thing called the wealth effect.
Even people who aren't in the market feel wealthier when stocks go up. So they spend and consume and drive economic activity.
But the negative wealth effect is real, too. When the market is down, people feel less wealthy, and so they don't spend, and the economy slows.
So, no, the economy is not going to freeze up, but it probably is going to slow down. Second question from John Ferrara in Eagleville, Pennsylvania.
Does Congress, John wants to know, have the ability to repeal the tariffs that Trump has put in place, or are they powerless to intervene? John, John, John, John. Article 1, Section 8, Constitution of the United States of America.
The Congress shall have power to lay and collect taxes, duties, imposts and excises and to regulate commerce with foreign nations. Congress explicitly has the tariff power, but they've given it to the president over the past couple of decades.
So, yes, they could repeal his tariffs. Republicans, though, in Congress are choosing not to.
From Tom Hulse in Lake Forest Park, Washington, trade deficits he wants to know about. The word deficit seems to be Trump's sticking point.
Can they be described in a way that doesn't make the net importer sound like they are on the losing end? I actually think the president's businessman brain sees the word deficit or hears it, and he understands it to mean a loss. For a business person, a deficit often is a loss.
But in trade, that's not true and it's not right. I, for instance, have a trade deficit with my local beer store.
I give them my money, but they give me beer. Same thing if somewhat more complicated in global trade.
The United States is a big, rich country whose citizens like to buy things often more cheaply than they can get here. They like to buy them from overseas.
We send them money. They send us stuff.
Maybe. Honestly, it's a vocabulary problem and we should just stop calling it a trade deficit.

OK, last question. My personal favorite from Eric Wilkinson in Baltimore.

Why isn't the void answering my screams? We didn't get a question about the U.S.-Russia economic relationship today, but we totally could. And more questions, by the way, can come to us on my Blue Sky feed.
It's Kai Rizdal, K-A-I-R-Y-S-S-D-A-L, at Blue Sky. Google it.
It'll get you there. Anyway, Moscow was entirely absent from the otherwise pretty comprehensive list of countries that President Trump tariffed last week.
And the president's interests in rebuilding ties with Russia are no secret. At the same time, though, the post-invasion sanctions are still in effect, with no sign that's going to change.
And in point of fact, the Yale School of Management says more than a thousand international businesses have left Russia or pulled back drastically in the past two years. But what if? What if there was business opportunity to be had over there? Charles Hecker lived and worked in Russia for decades.
He's got a new

book out. It's called Zero Sum, The Arc of International Business in Russia.
Charles, welcome to the program. It's a pleasure to be here.
Thank you. Could we do a level set here first? Before the invasion of Ukraine, what were things like in the Russian economy for American businesses? Well, before the full-scale invasion of Ukraine,

business in Russia was feeling slightly apprehensive, but relatively comfortable.

I mean, Russia had gone from a fairly wild frontier to a place that was complicated,

but where you could get deals done.

And I think that's the way American businesses felt, that it wasn't the easiest market to be in, but it was a place where you could do business. And that was, as you said, the result of three decades of American and international investment.
And the promise was that, and look, we've seen this play out before, most specifically with China, the promise was that changing the economy would change politics in Russia didn't happen.

What's your sense of why? That's right. So we made a series of assumptions about what would happen to Russia.
And in the early 1990s, the assumptions were a few things. And that is that if you invest in a country, that companies can change the way a country works.
The other assumption was that this would help steer Russia towards becoming a liberal democracy. And in fact, we assumed that the two had to happen simultaneously, that you couldn't have a market economy without a liberal democracy.
You know, we found out in countries like China that that's not necessarily the case. But in early days, we thought, you know, get lots of business into Russia.
They'll learn about how to run a market and they will democratize at the same time. Then just to skip ahead a little bit, we get to the annexation of Crimea.
We get to the invasion. American businesses, Western businesses largely leave, not entirely, but largely leave.
And now what you have over there is Chinese businesses, Indian businesses, and the specter under President Trump of maybe American businesses being able to get back in there. What do you think? Well, that's absolutely right.
So while the Westerners were away, a lot of other countries came to play. famously the one one of the big highways, as you get close to the city limits of Moscow, that highway is sort of dotted with car dealerships.
And those dealerships used to sell things like Volkswagens and Toyotas and Nissans. Those car dealerships now are almost exclusively selling Chinese cars.
So there's been some change on the ground. But you're absolutely right, Kai, to point out that the conversation in the United States now has completely turned around.
And with the advent of the Trump administration, the attitude of the United States now seems to be towards normalizing relations with Russia. And what that's done is it's kicked off a fairly widespread and fairly intense conversation about whether or how or when companies should go back.
And, you know, not every American company that left Russia will go back. But I feel quite strongly that a lot of companies are talking about it.
So let's say just to keep with cars here that Mary Barr, the CEO of General Motors, and look, I'm making this up. I have no idea what her plans are.
But let's say she calls you and says, Charles, you've lived and worked in Russia for a very long time. You're an expert on international business over there.
What do you think? Should I do it? What would you say? Well, I think I would tell her that the safest way to do business in Russia right now is probably from a distance. If there were a way for General Motors to put cars in boxes and export them to Russia and then unload them at a port, probably somewhere around St.
Petersburg, that might be one way of doing it. But to go build a factory that, you know, you'll want to see there for, you know, 40, 50, 60 or more years, that's a big leap before a lot of other questions get resolved about the future of Russia and international business.
Well, just on the way out here, let's lay out a couple of those questions. What else is there that's sort of floating around in your mind? Russian intellectual property law has been completely eviscerated.
And what Russia is allowing its own companies to do is to essentially counterfeit Western medication. So if I were an Eli Lilly based in the US, or if I were a Novo Nordisk, for example, based in Denmark, I'd be quite hesitant to go back until I knew that intellectual property rights in Russia were strong and defensible.
And I think maybe even most importantly, there's been a change to the business elite in Russia that may or may not want Western business back. And if they do, it will probably be on their terms and conditions.

Charles Hecker lived and worked in Russia for a very long time. His book on doing business over there is called Zero Sum, The Arc of International Business in Russia.
Charles, thanks a lot.

Appreciate your time. It's a pleasure.
Thank you. Coming up.

Most of my friends had actual children, and I had this.

A restaurant, but so much more.

First, though, let's do the numbers.

Yeah, the Wawa's early enthusiasm and then reality hit. Tariffs, midnight, China 104%.
Dow Industrial's off 320 points, 8 tenths percent, 37,645. NASDAQ down 335, 2 and a tenth percent, 15,267.
S&P 500 dropped 79 points, 1 and 6 tenths percent, 49 and 82. Could have been, believe me when I tell you, so much worse.
Bond prices down. Yield on the 10-year T-note up 4.29 percent.
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I'm Kai Rizdahl. President Trump is, of course, getting all the headlines, but tariffs are far from the only way that global trade gets short-circuited.
The Democratic Republic of Congo, which mines a whole lot of cobalt, 77 percent of global supply, should you be curious, has banned the export of that metal since February and is now considering extending that ban in what's becoming something of a trend, countries restricting mineral sales to influence prices on the global market. Daniel Ackerman explains what that's going to mean for an American economy that at the moment doesn't really produce much in the way of critical minerals.
You can find cobalt inside lots of technology, your phone, electric car batteries, wind turbines. I would be exaggerating, but only slightly if I said that airplanes would fall out of the sky without cobalt.
Dinah McLeod leads the Cobalt Institute, a trade group, and she says more than two-thirds of the world's cobalt is mined in the Democratic Republic of the Congo, or DRC. DRC really depends on the tax revenues that are associated with mining.
The government took this decision to try to prop up the price of cobalt. And prices have been propped.

There's been a significant jump.

Thomas Kavanaugh is editor of Battery Metals at the market intelligence firm Argus Media,

and he says after the export ban started in February, the price of a key cobalt compound

rose by more than 80 percent, and it could be just the start.

There's actually been some talk of the DRC and Indonesia maybe teaming up and creating

sort of an OPEC for minerals.

There hasn't been some talk of the DRC and Indonesia maybe teaming up and creating sort of an OPEC for minerals.

There hasn't yet been OPEC-level coordination among mineral producers, but governments these days are taking more control of their mining sectors.

Cullen Hendricks is senior fellow at the Peterson Institute for International Economics. He says they include not just the DRC in Indonesia, the world's top nickel producer, but also the top copper producer, Chile.
They are seizing this moment where there's such an emphasis on critical minerals to really re-evaluate their development models. One goal is to ensure that the minerals mined in those countries get refined there too.
But Hendricks says the Trump administration wants to increase refining here in the U.S. That is now putting the United States in direct competition with the policy ambitions of many of these mineral-rich countries that are also trying to move into the processing space.
Because when it comes to critical minerals, Hendricks says the real money isn't in digging them out of the ground. It's in turning them into something the world can use.
I'm Daniel Ackerman for Marketplace. The restaurant business is tough, even in the best times.
And the smaller and more neighborhood-y a place is, the tougher that business is. Marketplace's Samantha Fields reports from Smith Street in Brooklyn, New York.
When word got out that Leyenda was closing, owner Ivy Mix says it started filling up early every night. Everyone wants to get a piece now that we're closing.
Leyenda is a cocktail bar and restaurant with a focus on Latin American spirits, tequila, mezcal, rum,

cachaça, and food from all over the region. Papusas, mofongo, tacos.
Inside, there's a long wooden bar, gold ceiling, and candles on the tables. Out back, there's a private airy patio with string lights and creeping vines.
Mix opened Leyenda almost exactly 10 years ago. this little place, this little bar has been like my whole life.
You know, most of my friends had actual children and I had this. But this winter, she and her co-owners decided not to renew their lease and to close.
I mean, there's many reasons, right? The restaurant bar industry is difficult. It's become more difficult over time, the whole country over.
But especially in New York, she says, rent and insurance have gotten much more expensive. So has the cost of labor.
I'm the type of person that thinks that it should go up. But as a business owner, I'm like, whoa, if you look at our labor costs now compared to 2017, team, it's a huge difference.
Same with food. We sell a lot of guacamole here.
The cost of avocados have skyrocketed. Then there are credit card processing fees, which take 3 or 4 percent of the sale every time someone pays with a credit card, which is all the time.
At the end of every month, it's like, here you go, MasterCard and Visa. Here's all this money.
It all adds up in a business where if you're doing really well, you're making maybe 10 cents on the dollar. And at the end of the day, we're like, is the juice worth the squeeze? Like, maybe not.
Like, maybe not right now. Maybe not like this.
Maybe not this iteration. A lot of restaurant owners are feeling the same way.
Five years out from the start of the pandemic, Mick says people tend to think of it as being over. But the effects of COVID are still very much here.
If you got loans out during COVID, they're due now. If you are trying to still make up from losing all that revenue in COVID, we're in that now.
And the jubulance of post-vaccine 2021 and 22, when everyone was going out out a lot is decidedly over, she says. Now people are eating out less and drinking less when they do.
Then there's the future and tariffs. Everything I sell here is from a different country.
Literally everything. Also, most of my staff is from a different country.
It is very scary to look at this and be like, OK, if I'm forecasting two or three years from now, do I like what I'm seeing? If my lease is up now and I'm not going to get penalized for leaving it, I might just take the out. One of Mix's biggest worries about closing was what would happen to her staff.
But she says almost all of them have jobs lined up. And she's not leaving the business entirely.
She still has a wine bar in a different part of town and a wine store. But Leyenda was her first place where she built her career and a community.
Lots of regulars have been coming in these last few weeks to say goodbye. I came here on Tuesday, Wednesday, Thursday.
I'll be here on Friday and Saturday, so five days in a row. Devin Flynn-Perreau used to come in a few times a week when he lived in the neighborhood to sit at the bar and have a cocktail and tacos.
Even now that he lives an hour away in Queens, he still comes. This last week, he's been getting here early every day to make sure he gets a seat at the bar.
Tonight I'm going to be here for a very long time. I will definitely be going cocktail, mocktail, cocktail, mocktail.
It's a celebration of how great the bar was and also, you know, a bit of a wick. His old regular coffee shop nearby just closed recently too.
It's weird, he says. It makes him sad.
Businesses and people make up a neighborhood. So I consider this neighborhood my favorite neighborhood in any city.
But he says with friends who've moved away and his favorite business is closing, he might have to start rethinking that. I'm Samantha Fields for Marketplace.
This final note on the way out today, just because I haven't mentioned it in a while, oil, the U.S. benchmark West Texas, off another 3.7 percent today, 58.46 a barrel, which, yay, cheaper gas.
But also, boo, oil is down because the slowing economy means lower demand.

Our digital and on-demand team includes Carrie Barber, Jordan Mangy, Dylan Miettenen, Janet Wynn, Olga Oxman,

Ellen Rolfes, Edward Silver, Virginia K. Smith, and Tony Wagner.

Francesca Levy is the executive director of digital and on-demand.

And I'm Kyle Rizdahl. We will see you tomorrow, everybody.
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I think you're breaking into this wall regardless.

I was hoping you wouldn't say that. I need to go and get some whiskey, I think.

I would get the whiskey for sure.