Bank of America shares one area of the bond market set to deliver 13% returns in 2023 — and lays out the drivers of its ‘big reversal’

• Bonds are having one of their worst years ever amid high inflation and Fed tightening.
• But the assets are due for a rebound next year, many say. 
• In a recent note, Bank of America shared one area of the market they see returning 13%.

Bonds, like stocks, are having a terrible year. 

As the Federal Reserve zealously tightens monetary policy to curb the highest inflation seen in four decades, bond prices have fallen and yields have soared. Yields on the benchmark 10-year Treasury note recently surpassed 4%, their highest level since 2007. 

Corporate credit has also underperformed. The Bloomberg US Credit Index is down almost 17% in 2022.