Inflation is showing early signs of rising again in the US, and if it accelerates from here, high-yield issuers in the US could see a rise in defaults, according to a credit strategist at Bank of America. Oleg Melentyev.
A continued rise in price levels could impact corporate profits, even before higher interest costs are taken into account. Melentiev wrote in a note on Friday that 3% inflation is manageable for most junk-rated companies, but 4% will put pressure on them, while 5% inflation “could cause a widespread wave of defaults.”