Tesla junk bond spreads broaden to a record after a big loss

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Investors are asking for a record risk premium for holding Tesla Inc’s $1.8 billion junk bond after the automaker posted a $700 million first-quarter loss and indicated it may be in the market for more capital soon.

The cost on Tesla’s 5.3% note due August 2025 slipped, prompting its yield to the highest in about six months at 8.51% in European trading.

Its spread, the measure of the premium in yield investors demand the added risk of holding a bond from Tesla – rated six notches below investment grade by Standard & Poor’s and Moody’s – rather than a safer U.S. Treasury security, broadened by 3 basis points to a record 618 basis points.

By comparison, the spread on an average high-yield bond is 373 basis points, according to numbers from ICE BAML Index data, and for comparably rated “B-“ issuers it is 402 basis points.

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