Investors are rushing to buy U.S. corporate bonds, anticipating the Federal Reserve will cut rates later this year, which could result in credit spreads reaching levels not seen in decades. The buying frenzy is driven by expectations of a soft landing for the economy, and the first quarter has seen investment-grade companies raise a record $538 billion, indicating strong demand. Credit spreads have already tightened significantly, with investment grade and junk-rated bonds hitting their tightest levels in two years. Although this demand benefits companies by reducing borrowing costs, some investors are concerned about the reduced compensation for risk. Despite these concerns, demand remains robust due to insurance companies and pension plans seeking to match liabilities with high coupon-paying assets, and the reinvestment of coupons from existing bonds is expected to absorb a significant portion of this year's bond issuance.
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