Inflation Threatens Returns for All That Debt Firms Are Selling

Fear of inflation is driving a flurry of corporate-bond issuance, leading companies to raise money they don’t need. But higher inflation could also ruin returns for investors who are eagerly gobbling up all this debt.

Fueled by massive government stimulus, the U.S. is rebounding strongly from the pandemic, bringing up consumer prices. It’s a phenomenon called reflation, and strategists at UBS Group AG say it’s normally good for credit markets.

However, those same researchers just put out a report titled “Is inflation a threat to U.S. corporate debt?” that argues credit investors should brace for the possibility that spreads ...