Bond buyers are getting exhausted after absorbing trillions ofdollars of corporate debt in the past few years.

While they still gobbled up a record-breaking $135 billion ofU.S. investment-grade bond sales in July, they're getting pickier.They're now demanding the most extra yield to own the debt insteadof government securities in two years.

“The high-grade bond market feels satiated with paper,” Bank ofAmerica Corp. analysts led by Hans Mikkelsen wrote in an Aug. 3report. “What this market needs is a break -– either in the form ofa slowdown in supply volumes or some healthy inflows.”

Dollar-denominated investment-grade bonds have been steadilylosing value. Prices on the notes have fallen to an average 104.8cents on the dollar from 110.4 cents in January, according to Bankof America Merrill Lynch index data.

In 2015, top-rated corporate bonds are up a measly 0.1 percent,underperforming a 0.8 percent return for U.S. government and agencydebt. It's the corporate market's smallest gain in the period since2013, when former Federal Reserve Chairman Ben S. Bernanke sentmarkets reeling by talking about ending the central bank's bondpurchases.

While there is some concern about the Fed's plan to raiseinterest rates for the first time since 2006, that isn't the mainreason behind the meager returns.

Instead, you can blame plunging commodity prices, which chilleddemand for debt of metals, mining and oil companies. And you canpoint a finger at the massive amount of U.S. corporate-bond saleslast month, about 40 percent of which was unexpected, CitigroupInc. analysts Sonam Pokwal and Jason Shoup wrote in an Aug. 4report.

It was “the heaviest July we have on record,” at more thandouble last year's showing in the period, they wrote. “Last month'sissuance represents a huge surprise.”

Why do companies still need to borrow so much after selling $7trillion of U.S. securities since 2008 as the Fed held benchmarkrates near zero?

They want to acquire other companies, and they want to pay forit with debt. Almost $40 billion of investment-grade bond sales inJuly went toward mergers and acquisition activities, Bank ofAmerica data show.

Of course, investors bought all of this debt and they're stillwilling to put money into this market for the extra yield it offersover alternatives. They've poured almost $47 billion into U.S.investment-grade bond mutual funds this year, according to WellsFargo & Co. data.

At the same time, yield premiums on the debt have climbed to1.58 percentage point more than benchmark rates, from 1.29 pointsin March. Amid the July deluge, investors sent spreads up an extra0.12 percentage point.

It turns out there are some limits to their appetite.

Bloomberg News