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Riskier Corporate Debt Beats Blue Chip Bonds as Fed Pulls Back Stimulus

  • Tighter policy, elevated pricing seen as challenges for credit
  • Investment grade faces first back-to-back loss since 1980

Source: Getty Images

For an investor, this has been a great year to take credit risk, and it looks like more of the same in 2022, even as the Federal Reserve dials down stimulus that triggered a borrowing bonanza.

Blue-chip corporate bonds face the longest losing streak in 40 years because of their high duration, or sensitivity to rate increases. Junk-rated debt is meanwhile supported by a recovering U.S. economy, robust balance sheets, the global hunt for yield and record low default rates.