BofA/Merrill: BUY CORPORATE BONDS (please?)

With over $500 billion in maturities due this year, you are going to be barraged with solicitations from advisors and will read lots of reports, such as the shit BofA touched upon today in an interview.

If you’re bullish on markets, I suppose bonds are a great buy. Otherwise, you’re entering a clownish world filled with ridiculous people. Naturally, the best credits are attractive, up to a point. But if the global economy is set to grind lower, buying corporate bonds now is not ideal.

The extra yield that investors demand to hold U.S. investment-grade bonds over Treasuries, or spread, may drop to 150 basis points by the end of the year from 211 on Feb. 26, said Hans Mikkelsen, head of U.S. investment-grade credit research at Bank of America Merrill Lynch. The measure last touched that level in July.

While issuers stepped to the sidelines this year because of increased volatility, more positive sentiment since mid-February is helping spur sales and tighter yield premiums, Mikkelsen said in an interview.

“There is a general sense among our investors that corporate balance sheets are late cycle and that leverage ratios are sort of getting to the peaks we have seen historically,” Mikkelsen said. “I just take the opposite view of that.”

Banks need their bonuses and their bread buttered. Buy bonds.