(Bloomberg) -- Investment-grade corporate bonds are set to rally through the end of the year, according to Bank of America Corp.
Spreads in the U.S. high-grade bond market should tighten amid favorable supply-and-demand conditions, while the end of uncertainties surrounding the U.S. election may also add a boost, analyst Hans Mikkelsen wrote in a note dated Oct. 31. The call came after strong selling Wednesday.
“We doubt the underlying story has changed,” Mikkelsen wrote. “Today in our view marks the beginning of a long year-end rally in credit.”
Thirty-year high-grade corporate yields are now above 5 percent for first time since 2016, which will likely spur buying from yield-hungry investors, such as pension funds and insurance companies. Plus, a lack of bank issuance, fewer mergers and acquisitions and less supply should spur more year-end demand, the analyst wrote.
A stronger dollar also continues to attract “significant amounts” of unhedged foreign buying, he said.
However, the bank still expects wider credit spreads in 2019 and 2020.
To contact the reporter on this story: Jeremy Hill in New York at jhill273@bloomberg.net
To contact the editors responsible for this story: Tom Freke at tfreke@bloomberg.net, Randall Jensen, Brendan Walsh
©2018 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
