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High gas prices will weigh on bond investors tied to SUVs

Rush hour on Interstate 405 in Los Angeles.
AP Photo/Reed Saxon
An SUV that can’t plow over this traffic hurts when gas prices are high.
By Melvin Backman
Published Last updated This article is more than 2 years old.

With oil prices on the rise, it looks like persistent higher gas prices might hurt bond investors both at the pump and in their portfolios.

Moody’s has a note out discussing the tiny corner of the credit market dedicated to bonds backed by auto leases, focusing particularly on the greater role that SUVs have played within that market. SUV sales were rising at a mild pace over the past few years, but when gas prices suddenly plunged late last year, they shifted in the last few months to make up the biggest portion of American auto sales averaged over a three month period since 2005. Moody’s warned that auto-lease bond buyers may have a harder time getting paid as oil prices climb. As gas prices rise, gas-guzzling SUVs will be harder to sell to new customers once the terms of their leases are over.

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