Report published September 25, 2026
More Rate Vol = Wider Spreads: BofA Investment Grade Credit Strategy
Bank of America · September 25, 2026
Spiking rate volatility and strong macro data have pushed US investment grade credit spreads wider, with near-term risks tilted toward further weakness. The strategists recommend barbelling 5yr and 30yr tenors against 10yr, de-risking BBBs to neutral, and favoring non-cyclical sectors over cyclicals and French Yankee banks.
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Finvaulta summarizes Bank of America's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
Key Takeaways
- 1.Surging interest rate volatility and heavy upcoming supply are putting upward pressure on investment grade credit spreads, with liquid IG spreads already 5bps wider.
- 2.On the curve, adopt a barbell positioning by overweighting 5-year and 30-year tenors while underweighting the 10-year tenor, which is most vulnerable to bond fund and ETF outflows.
- 3.Favor defensive, non-cyclical sectors such as Utilities, REITs, and Energy over cyclical sectors like Autos and European Yankee banks.
Table of Contents
- Weekly technicals
- Key views
- More rate vol = wider spreads
- How to position in credit?
- Strong AI economy = more rate vol
- Supply disruption is temporary
- Weaker bond fund flows
- Spread curves: weak 10yr tenor
- Weaker cyclicals
- Not much decompression
- Mini rate shock
- French Yankee banks vs French sovereign
- More yield, less duration
- What did insurance co's buy in 2Q?
- Public corporate bonds
- AI impact on IG
- Taking stock of AI obsolescence
- Flows
- Stocks weak, loans strong, IG is ok
- Appetite for floaters
- Supply
- Weekly technicals details
- Sector views
- Weekly data and charts
- High Grade Spreads by Sector
- High grade sector historical performance
- Sector performance and relative value
- IG spreads vs vol
- Supply statistics
- Corporate spread curves
- Portfolio trades tracker
- Liquidity tracker
- Dealer inventories
- CDS cash basis
- USD EUR relative value
- Mutual fund flows
- Taiwan ETF flows
- Market pricing of dollar price impact
- Hybrid relative value
- 144A relative value vs registered
- Energy sector spread
- Industrial BBB / single-A relative value
- Industrial BB / BBB relative value
- Low BBB rating drift
- Rating actions summary
Report data
Exhibit 3: Higher rate vol, wider spreads — as of September 24, 2026.
| Metric | Estimate | Context |
|---|---|---|
| Liquid IG spread change | 5.0 bps | Spread widening driven by jump in rate volatility |
| IG Index Spread | 79 bps | BofA US IG Corporate Index COA0 spread |
| Interest rate volatility index jump | 23 points | Jump in rate vol triggering spread widening |
| US IG gross issuance | 36.5 USD billion | Lower than expected $50-$55bn due to rate volatility |
| Net IG supply net demand projection | 15.6 USD billion | Weaker technical balance expected next week vs $10.1bn current week |
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