Automakers' bonds in the US debt markets weakened following President Donald Trump's imposition of 25% tariffs on car imports and warnings of an upcoming trade war. Risk premiums increased on recently issued notes from US units of Volkswagen AG and BMW AG. Volkswagen's 5.35% notes due in 2030, sold just a week ago, saw a widening of 0.24 percentage point to 1.35 percentage points. Concerns over tariffs are affecting new bond sales, with French auto supplier Forvia SE raising the yield on its initial US dollar offering to attract buyers.

The ongoing struggles in the automakers' debt sector align with a trend seen throughout the year wherein the companies' bonds have underperformed the broader US market. Trump's proclamation on imposing tariffs on car imports, set to take effect on April 3, is expected to escalate to include major components like engines and transmissions a month later. This move threatens to increase vehicle costs, potentially impacting manufacturers' profits. Share prices of these companies experienced a decline.

Apart from BMW, other investment-grade bonds that have shown weaker performance in the market include those from Honda Motor Co. and General Motors Co. Funding costs for automakers like Volkswagen, Toyota Motor Corp., Mercedes-Benz Group AG, and Hyundai Motor Co. are on the rise, potentially making them more susceptible to financial pressures.

Current market conditions have resulted in bonds losing value post-issuance, unlike in previous years when bonds gained value during the initial pricing discussions, as highlighted by Bloomberg Intelligence credit strategist Joel Levington.