Walking on a tightrope without a safety net is a scary experience. But that is what many bond investors are now intent on doing. On Wednesday, Centex, a US housebuilder, sold $1bn of asset-backed paper, with the one-year tranche priced just 7 basis points over Libor - a record tight spread for this class. A similar investor feeding frenzy occurred last week, when the French government sold 50-year debt. Meanwhile, spreads for many corporate issues are now at levels last seen just before the collapse of Long-Term Capital Management, the hedge fund, in 1998.

Can this last? Yes, insist the investment bankers flogging this debt. In the short term they are probably right. Current economic conditions support low default rates: Moody’s expects the highest proportion of issuer upgrades this quarter since 2001. Central banks are proving slow to mop up excess liquidity. There is little sign that hedge funds are unwinding the leveraged trades or governments backtracking from regulatory changes that are supporting bond markets.