Salient to Investors:

Concern is rising that the Fed will curtail unprecedented stimulus while debt investors are becoming more discriminating

Jody Lurie at Janney Montgomery Scott said the last year was an issuer’s market but the tables have turned as borrowers now listen to the demands of investors.

Eric Beinstein at JPMorgan said the biggest banks are paring inventories even as investors absorb $16 billion of new debt issuance in a weakening market, which is unusual.

Bond yields have had the longest streak of increases since the eight weeks ended Oct. 31, 2008.

Josh Witz at Societe Generale said the new issue market got overheated but is still very healthy.

FRB Dallas President Richard Fisher said it would be prudent to reduce bond buying, while FRB San Francisco President John Williams said a modest adjustment downward is possible as soon as this summer.

Robert Smith at Sage Advisory Services said evaporation of excess liquidity provided by the Fed will result in a greater cost extracted by investors on corporate borrowers. Smith fears everyone rushing for the door at the same time on the basis of two or three policy statements, but said it is unclear whether the economy will grow fast enough to warrant a reduction in QE.

Long-term corporate debt trading at a discount is 15 percent of the market versus 3 percent on May 1.

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