Though the world economy faces a huge output gap and the inflationary expectations remain subdued, these factors will remain favorable for the bond markets.Corporate spreads may squeeze further as some clarity on supply issue emerges.Market is already witnessing spread coming down and in the coming time it is expected to come close to historical Long-Term Average.However, too much liquidity in the banking system as well as light positions on the bank statutory liquidity ratio (SLR) may result in good demand.