Consumer vs. Iran

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Consumer vs. Iran

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Situation Room

Credit Analysis

Consumer vs. Iran 13 July 2026

IG spreads were wider again on Monday on the combination of concerns about bank Credit Strategy

supply and the escalation of the war in Iran. We think the key implication for IG from the United States

Iran escalation is higher inflation, a more hawkish Fed, higher rates and a flatter Cross Product

Treasury yield curve. Our preferred positioning: 1) 5s10s IG spread curve steepener, and Yuri Seliger

2) fade any weakness in cyclical sectors. Credit Strategist

BofAS

Resilient consumer +1yuri.seliger@bofa.com646 855 7209

The US consumer has been surprisingly resilient. In fact, consumer spending has Sohyun Marie Lee

accelerated despite the still elevated gasoline prices (see BofA Institute note: The CreditBofAS Strategist

Institute Employment Report: June 2026, Exhibit 2). With the economy doing well, not +1 646 855 7217

sohyun.lee@bofa.com

surprisingly, we expect a relatively hot CPI print on Tuesday (see CPI Inflation Watch:

June US CPI preview: Headline relief but core services inflation to remain sticky).

In this report

Curve and sector positioning

Our economists are calling for the Fed hiking cycle to start this year. The hikes would Daily supply snapshot

flatten the 5s10s Treasury yield to zero (see Global Rates Viewpoint: Mid-Year). The

Daily dealer inventories update

flatter yield curve will make front-end yields more attractive and steepen the 5s10s IG

spread curve, which so far has lagged the flattening in the Treasury yield curve (Exhibit Daily HG fund flows

1). We would fade the weakness in cyclical sectors since the start of the year. As a

result, we are long Autos and Leisure, and short Consumer Products, Health Care (Exhibit Daily foreign demand tracker

3).