Investors Vulnerable to Loss on Rising Duration: Credit Markets

Corporate bond investors are facing the potential for record losses when policy makers start to raise interest rates as companies take advantage of falling borrowing costs to sell longer-term debt.

Bondholders are more vulnerable because notes maturing in 10 years or more made up 39 percent of sales last month, the most since December 2007, according to data compiled by Bloomberg. Bank of America Merrill Lynch indexes show the duration of corporate debt measuring price sensitivity to yield changes climbed to a record 5.69 years on Aug. 31. Telecom Italia SpA’s 5.25 percent notes due 2055 would lose 6 percent of face value should the yield rise 50 basis points.