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In corporate bond markets, the dreaded word “bubble” has become a topic du jour.

As it should be. The environment for a bond bubble is ripe, and recent developments suggest one is actively being blown up.

This is especially true for junk-rated bonds, issued by companies judged to be the most likely to default.

Right now, prices of corporate bonds reflect a dramatic rally over the past six months. Low interest rates from central banks–as well as various bond-buying programs known as quantitative easing–have increased the amount of cash in the financial markets. So investors who buy bonds have a lot of money, and are competing for a finite amount of debt. This has pushed the average yield for junk-rated bonds in Europe to a record low of 5.68% Friday, according to a Markit index.

Companies can borrow at these incredibly cheap rates, so they are. Junk-bond issuance is at a record $54.5 billion this year, up from $32.9 billion in the period last year, Dealogic data show.

One worry is that investors less familiar with high-yield bond markets, but who need to find a home for their money in order to generate return, might be misjudging the risks. Another is that experienced investors are flat-out ignoring the risks in a blind push for yield.

Meantime, Europe still has problems. Economic growth is subdued, recessions reign in the south, unemployment is high and there are few signals that this will change for the better anytime soon. With demand for goods and services depressed, companies face a difficult operating environment.

The gamble central banks are taking is that their cheap, extra cash will help produce economic growth. If it doesn’t and companies start defaulting at an increased rate, or investors think they might start defaulting, or actually, if anything bad happens that investors don’t like, the market could pull back. Pop goes the bubble.

Given all this, talking about a bubble is relevant. Pessimists would see nothing but an inevitable blowup.

But a report from Moody's Investors Service on Friday said concerns look overstated. The report examined U.S. and European markets for corporate bonds rated both junk and investment-grade, although it noted particular risks associated with junk debt.

The fact is that companies are pretty strong at the moment, Moody’s said. The recent financial crisis focused on sovereigns and banks. Companies got defensive, and their balance sheets remain robust.

“The wider risk to investors lies in the potential for a correction in benchmark rates, which would imply losses to investors in all categories. But there are no strong indications that such a normalization of benchmark rates would result in a sharp expansion in credit spreads,” the report said.

Other credit analysts seemed to agree. While the current market levels in Europe mean that another strong credit rally is unlikely, neither is there much chance for a major reversal.

“In the absence of headlines to take us wider, we believe the path of least resistance remains a slow grind tighter,” Barclays credit analysts said.