Monday Market Minute | Mar 9, 2026

War premium lingers as Bessent floats the 15% ceiling — Canadian credit spreads begin to widen

What Moved

The geopolitical risk premium that has defined 2026 refused to fade last week. With the war that began in late February still raging and Strait of Hormuz traffic near a standstill, crude stayed elevated and markets held a defensive posture. Against that backdrop, Treasury Secretary Scott Bessent said on March 4 that the Section 122 surcharge "could be raised to 15%" — the statutory ceiling on the balance-of-payments measure that replaced the struck-down IEEPA tariffs in late February. No formal increase followed; the rate remains 10%, and USMCA-compliant Canadian goods, energy, and fertilizers stay exempt. But the remark did its work regardless, keeping trade uncertainty alive just as the pricing signal beneath it started to move. Canadian investment-grade corporate spreads widened roughly 12 basis points through February as risk repriced, and USD/CAD held near 1.38. The loonie's calm masks a subtler shift: the cost of credit is inching higher at the margin even before any tariff escalation is confirmed.

Why It Matters

Spread widening is the quiet part of a tightening cycle. A dozen basis points is not a rupture, but it marks the direction of travel — a higher cost of capital for investment-grade borrowers and a signal that lenders are demanding more compensation for the same risk. For private credit, that repricing is where opportunity lives. When banks grow cautious and public-market financing costs climb, well-capitalized private lenders step into the gap, capturing displacement flow at improved terms. The 15% chatter matters less for its direct effect on Canada — the USMCA carve-out remains intact — than for the persistence of uncertainty it sustains. Deals need a visible horizon to close, and every signal that the trade regime could harden pushes that horizon further out, widening the premium that patient, flexible capital can command.

Signal to Watch

Watch for the US Trade Representative to open Section 301 investigations in the coming days — the successor-tariff track that could outlast Section 122's late-July statutory expiry and give the trade barrier a more durable legal foundation. Closer to home, the Bank of Canada's March 18 rate decision looms; with growth soft and inflation still benign, the tone of that hold will shape how private lenders price duration into the spring.