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Is Fixed Income The Next Bubble?

In the spirit of dialog with SA readers, are there any opinions out there about the general valuation of risk assets in the fixed income market?

With Ben Bernanke Hoovering up agency MBS to the tune of $6 billion each week, it is enough to match nearly every new loan produced. QE1 seemed to have solved the fundamental asset valuation problem and provided a floor for the market, but has this gone too far? Operation Twist's appetite crowds out domestic and foreign central banks who need to deploy economic capital.

Fixed income ETFs have been flush with new money this year. While an ETF is a solid investment tool, has the demand for index securities gotten over its ski's? The demand for index eligible bonds which are in the sights for bond ETF's have exhibited immense demand and increase in price, but when is enough enough?

Municipal bonds were licking their wounds 12 to 18 months ago but seem to be out of the gun sights of the press. Fundamental valuation of many state and local balance sheets are not significantly better enough to justify this rise in valuation.