Corporate Bond Credit Spreads Tighten, Prices Rise

Investor demand for investment grade corporate bonds is increasing, resulting in tighter credit spreads to treasuries, as expectations about downgrades and defaults fall. As the market begins to forecast a lower federal funds rate for the rest of the year, investors are rotating into bonds from money market funds before yields drop. The Wall Street Journal notes that investors are optimistic about the economy due to the stable unemployment rate and healthy corporate balance sheets. Another factor contributing to the increase in bond prices is scarcity, with many companies choosing not to issue debt when interest rates were high, resulting in a shortage of supply. 

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