The 10-year Treasury yield has surged to 4.75%, its highest level since October 2023, driven by strong U.S. economic data and a hawkish Federal Reserve, according to a recent report by BofA Global Research. This rise in yields is exerting pressure on investment-grade (IG) spreads, which are expected to widen due to weaker demand amid higher duration risks. BofA analysts note, "The net impact on IG spreads in the near term is negative, as demand should be weaker on higher duration risks while supply is seasonally elevated in January." The report highlights that the elevated yields are attracting stronger foreign demand, particularly from Asia, due to the steeper Treasury yield curve. However, the higher rates are also flattening the 10s30s IG spread curve, as companies avoid locking in more expensive long-term borrowing costs. Despite these challenges, BofA maintains that IG spreads should remain relatively resilient in 2025, trading within an 80-100 basis points range, supported by strong credit fundamentals and healthy U.S. economic growth.