Brian Chappatta, Columnist

Deflation Is the Biggest Fear of Leveraged Bond Markets

Traders are learning that the prospect of collapsing prices can be just as painful as inflation.

March 9, 2020 at 5:09 PM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

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It’s often said that inflation is the bogeyman for bond traders. Indeed, accelerating price growth diminishes the value of each fixed interest payment over the years. Investors would be better off buying assets that increase along with prices, like real estate or equities, in theory.

This week, bond traders are learning that the prospect of deflation can be just as painful.