Investors’ preference for the most- liquid corporate debt is running higher than any time since the credit crisis, a signal they’re preparing for the four-year rally to end.

The expense incurred by credit traders to complete bond transactions was the lowest last year relative to costs implied by the market’s average bid-ask spread since 2009, according to Barclays Plc. The shift, a sign that buyers are favoring securities that are easiest to trade, has helped financial bonds beat industrial debt by the biggest margin on record, Bank of America Merrill Lynch index data show.

While the focus on the most-liquid bonds has added to their gains, it’s also positioned them for steeper losses when demand deteriorates. Pacific Investment Management Co.’s Bill Gross recommended against buying corporate bonds after the extra yield investors demand to hold them rather than government debt declined 5.85 percentage points since the end of 2008.

“You had this area where people were concentrating their positions,” Bradley Rogoff, head of global credit strategy at Barclays, said in an interview in New York. “It creates more upside and downside.”

Liquidity has been stifled as some investors hoard bonds with prices rising 4 percent last year, the most since 2009, and as dealers reduce inventories in response to risk-curbing regulations aimed at averting another credit seizure.

Default Swaps

“I don’t think the environment will change any time soon,” said Brian Machan, a money manager who helps oversee $433 billion at Aviva Investors North America Inc. in Des Moines, Iowa. “You’re going to want to look at bonds that you can actually trade. From traders’ standpoint, they’re not going to short a bond they don’t think they can get back.”

Elsewhere in credit markets, a gauge of U.S. corporate credit risk advanced for a second day from the lowest level in almost four months. The global default rate for high-yield debt dropped 0.6 percentage point in the fourth quarter to end 2012 at 2.6 percent, Moody’s Investors Service said. Windstream Corp. was said to have increased the size of a loan it’s seeking to refinance debt to as much as $1.345 billion from $300 million.

Bonds of Charlotte, North Carolina-based Bank of America Corp. were the most active dollar-denominated corporate securities yesterday, accounting for 6.9 percent of the volume of dealer trades of $1 million or more, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

European iTraxx