Shrinking Spreads

Out along the edges

Always where I burn to be

The further on the edge

The hotter the intensity

--Kenny Loggins

Corporate bond spreads have narrowed back to 2007 levels.

At the same time, corporate leverage continues to climb. This is painfully obvious when combing thru corporate balance sheets--debt has risen significantly for nearly all large corporations.

The culprits. Stretching for yield under conditions of financial repression. Borrowing 'cheap' to buy back stock. And don't forget to add a dollop of moral hazard.