By Shankar Ramakrishnan

April 4 (Reuters) -

U.S. President Donald Trump's tariffs brought U.S.

investment-grade bond issuance to a screeching halt this week,

but market stress had already been apparent over the past month

as jittery investors pushed back on pricing, some bankers said.

Since Trump imposed sweeping tariffs on U.S. imports on

Wednesday, no new bonds have been priced by investment-grade

companies.

The halt in offerings followed a period last month when, for

the first time since the pandemic, companies struggled to issue

bonds at the price they wanted, several bond syndicate bankers

said.

In some cases, bankers said, investors unusually withdrew

millions of dollars in orders for some bonds as books were being

built on new U.S. investment-grade bonds, because the final

pricing was worse than they expected. To their surprise, the

bankers said, investors were changing their minds midway at a

higher-than-normal rate.

The investor pushback has not been previously reported.

"Investors are dropping out of some deals even if they are

priced only one or two basis points tighter than where they want

it to be," said Teddy Hodgson, global co-head of fixed income

capital markets at Morgan Stanley ( MS ).

During the book-building process, when banks seek out bids,

Hodgson said it is "an unwritten norm" that pricing levels can

change 20 to 25 basis points.

A senior syndicate banker at a large U.S. bank, who

requested anonymity to speak candidly, said for some March bond

offerings, as much as 60% of the orders were canceled as pricing

levels tightened. Before March, a 10-15% order drop rate was

considered healthy, the banker said.

Bankers declined to specify bond deals that were

affected.

The investor pushback shows how Trump's trade war has been

affecting market dynamics in recent weeks, as a prolonged trade

war is expected to slow growth and weigh on corporate bonds.

After Trump's tariff announcement on Wednesday, Treasury

bond yields have plunged while spreads are widening.

On Thursday, ICE BAML investment-grade index

spreads, or the premium investors charge over Treasuries,

widened 10 basis points in the largest such move since the U.S.

regional banking crisis in 2023, BMO strategist Daniel Krieter

wrote in a note.

High-grade index spreads are at their widest levels

since August, Krieter said.

The demand for more compensation to buy new corporate

bonds was merely to protect investment returns which have

already been hurt by the recent widening of spreads, said

bankers.

Morgan Stanley's ( MS ) Hodgson said in a normal market, 85% to 90%

of new issues tend to outperform the broader market, but today's

range is more like 30% to 40% as worries about a recession push

yield spreads wider.

Companies are already changing strategies to minimize deal

execution uncertainty, said Richard Wolff, head of U.S. bond

syndicate at Societe Generale CIB.

"Some companies that are infrequent issuers of bonds are

starting to use investor marketing in an attempt to garner

pre-deal interest before announcing a new bond offering."