The bets have paid off. U.S. high-grade notes are poised for an annual return of 10.4 percent, the most since 2009 when credit markets were rebounding from their seizure, according to Bank of America Merrill Lynch index data. Junk bonds, meanwhile, are on track for an 8.9 percent gain.
Investors are demanding 1.13 percentage points of extra yield over Treasuries to own investment-grade debt, down from 6.56 percentage points in December 2008. In June, the spread fell to 1.06 percentage points, the lowest since 2007.
In other words, investors are demanding less and less compensation for owning debt that’s safe enough.