The big story of the year was the furious rally in bonds (bond market news), which was great news for issuers. Junk bond (junk bond news) issuance hit $75.5 billion in the first quarter, which just beat out the previous record of $75.2 billion in the second quarter of 2007. Across the board, bonds were big investments, and that really helped push yields from very high levels to very low levels. Spreads above Treasury (Treasury news) issues are surprisingly low now, and you have to question if they can go much lower.

MarketWatch noted that recent "auctions of two-, five-, and seven-year Treasurys flopped." They raised record amounts in the case of the seven-year but at surprisingly high yields, which set off a big sell-off of Treasury issues. No wonder some people are calling the end of the epic rally, which has been so kind to the FICC operations of Goldman Sachs (NYSE: GS) and others. Bill Gross (Bill Gross news) has made headlines for suggesting the long bond had likely peaked. Some think a bear market is about to set in or at least a cooling off period. Rates will be closely watched, that's for sure. But its also likely that demand for Treasuries especially will prove really strong, from domestic and foreign investors. Lots of government debt is being issued this week, so we shall see.

For more:
-  here's an article on Bill Gross's call

Related Articles:
Bond market vigilantes punish countries too
A cruel rally in junk bonds
Returns on big bank TARP investments strong
Treasury sale of Citigroup stock the right move?
Treasury to sell Citigroup shares?