Flatter Yield Curve Is Bad News for Corporate Bonds, BofA Says
- Sees spreads in the belly of the curve widening substantially
- Rising hedging costs will probably curb foreign demand
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The inflation fears that have clobbered short- and intermediate-term U.S. Treasury notes this month could spell trouble for credit markets, according to Bank of America Corp. strategists.
Worries about rising inflation have shrunk the gap between shorter- and longer-term Treasury yields. That kind of yield curve flattening historically hurt investment-grade corporate bond returns, strategists wrote in a report this week that makes the direct opposite call that JPMorgan Chase & Co. made this week.