Analysis-Relentless US credit demand seen driving second-quarter rally

An investor scramble to lock in returns before the Federal Reserve cuts rates is expected to sustain a rally in the U.S. corporate bond market into the second quarter, with one strategist saying it may touch levels not seen in three decades. Credit markets are being overwhelmed by a buying frenzy, as investors bet the Fed will engineer a soft landing, taming inflation without causing a recession, and then cut interest rates later this year to support growth. On March 21, the premium paid by companies over Treasuries, called credit spreads, on investment grade rated and junk-rated bonds touched their tightest levels in two years – at 91 basis points and 305 basis points, respectively.