Investors are shifting money out of government bonds and into US and European company debt, challenging the traditional belief in the safety of US government debt. In June, $3.9 billion left Treasuries while $10 billion went to company debt. US high-grade corporates have seen $13 billion in net client purchasing in July.

The switch from government to corporate debt is gaining traction, driven by concerns over US fiscal deficits. The US lost its AAA rating, and Trump’s tax cuts could add $3.4 trillion to deficits. Corporate profits remain strong, with more companies beating earnings estimates this year.

Valuations for company debt are high, with spreads tightening. Some money managers are cautious due to tight spreads, but others see corporate debt as a better option than government bonds. The world is shifting towards more corporate debt, with some viewing it as a safer choice.

In the leveraged loan market, there were over $83 billion in launches, driven by repricings. Billion-dollar M&A deals are not benefiting Wall Street, and lenders are demanding higher prices from European borrowers. Chinese developer Country Garden Holdings Co. agreed to restructuring terms, while PepsiCo Inc. and FedEx Corp. issued significant bonds.

Carlyle Group Inc. recruited Alex Chi to lead its direct lending business, BMO Capital Markets hired Nii Dodoo as head of private credit financing, and Christin Chan left BNP Paribas. Toronto-Dominion Bank re-hired Sarah Classen, Ares Management hired Sarah Cole, and Jefferies Financial Group plans to expand its credit secondaries team.

Investors are shifting towards corporate debt, with concerns over US fiscal deficits and rising interest costs driving the move. High valuations and tight spreads in the corporate debt market have some money managers wary, but others see it as a better option than government bonds. The market is evolving towards more corporate debt as a safer choice.

Read more at Yahoo Finance: Rising Fiscal Deficits Drive Billions Into Credit