Loans are yielding more than high-yield bonds for the first time amid recent "gyrations" in the credit market, according to Bank of America Corp.

Leveraged loans are yielding 9 percent after adjusting for fixed-rate differentials and floors on the London interbank offered rate, compared with 8.7 percent for U.S. high-yield bonds, Oleg Melentyev and Christopher Hays, New York-based Bank of America strategists, wrote in a Sept. 2 research report.

Loan yields have jumped on concern about a possible double-dip recession and the Federal Reserve's pledge to keep its benchmark rate at a record low through at least mid-2013, Melentyev said today in a telephone interview. Bonds typically yield 100 basis points to 150 basis points more than loans, he said. A basis point is 0.01 percentage point.

Continue Reading for Free

Register and gain access to:

  • Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
  • Informative weekly newsletter featuring news, analysis, real-world cas studies, and other critical content
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.