Fed Rate Hike May Cut Foreign Demand for U.S. Company Bonds
- Tightening will boost currency hedging costs for investors
- That could squeeze or ‘even turn around’ inflows into credit
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The overwhelming foreign demand for U.S. company bonds that’s allowed corporate America to sell more than $1 trillion of cheap debt this year may vanish if the Federal Reserve raises rates.
That’s the warning from Deutsche Bank AG strategists, who say it may become costlier for foreign buyers to own U.S. corporate bonds if the Fed begins tightening just as central banks overseas start to cap their unprecedented stimulus programs.