Inflation is showing early signs of picking up again in the US, and if it accelerates from here, US high-yield issuers could see a surge in defaults, according to Bank of America Corp. credit strategist Oleg Melentyev.
Persistently rising price levels could weigh on companies’ earnings, even before accounting for rising interest costs. A 3% inflation rate is easily manageable for most junk-rated corporations, but 4% would pressure them, while 5% inflation “could cause a full-scale default wave,” Melentyev wrote in a note Friday.
Overall inflation was 3.7% last month compared with August 2022, but the core consumer price index, which excludes food and energy costs, rose 0.3% last month from July. That marked the first month-over-month acceleration since February, Bureau of Labor Statistics data showed Wednesday.
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