(Bloomberg) — Demand for US high-grade corporate bonds is getting “unusually strong,” raising the risk of a market overshoot as investors absorb a glut of supply, Bank of America Corp. said in a note this week.
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“The unusually supportive technicals currently are unlikely to be sustainable in the longer term,” strategists led by Yuri Seliger wrote in a note, describing conditions as “bubbly.” That may put pressure on risk premiums as the market continues to be inundated with new bond sales.
So far, recent corporate borrowers have had no problem finding ready buyers for their bonds, and the market has powered ahead despite the wave of issuance. The difference in yield, or spread, between investment-grade bonds and risk-free Treasuries dropped one basis point overnight to trade at 91 basis points, or 0.91 percentage point, according to a Bloomberg index tracking the debt. That’s the tightest in more…
