Corporate Bonds Priced to Perfection

Just posting this to record the event for future reference. This example of today's bond market pricing is a set up that makes us uncomfortable about bond prices. They've rallied so much that spreads don't allow much in the way of price appreciation on Corporates unless Treasury rates across the curve all come down.

It would be an unusual situation indeed for the U.S. economy to recover and have Treasury yields drop from where they are now. Some examples of price movement lately:

Colgate deal which priced several weeks ago at T+ 67. The deal was a six year maturity. That issue is now traded 14 basis points rich to the 7 year Treasury.
Walmart 5 year paper issued in May at T+ 125 basis points. That paper trades 40 basis points over the 5 year Treasury.
MSFT 5 year paper is freely available at T+ 25

Source: Across the Curve

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Update 10/15/2009
J.D. Steinhilber, over at Seeking Alpha, provides some current bond information and more detail on the bond investor's dilemma.