The bond market appears to be entering precarious territory. Last week's $1.3bn sale of 50-year bonds by Goldman Sachs highlighted the huge global appetite for high-yield bond investments as investors are desperately chasing returns. The Goldman Sachs issue was sold in lots of $25 specifically to attract retail investors, a first for one of the premier global banks. This is raising concerns among some fund managers that the bond market may be overheating.

As interest rates remain at historical lows, institutional and retail investors alike are throwing money at global bond markets. According to an attendee at a recent gathering of debt market specialists in London, there was a palpable concern in the industry about bond markets overheating.

Retail investors have increased interest in the bond market as equity markets are considered higher risk and offer lower returns. For example, the FTSE and Iseq have fallen 3.2% and 23.2 % respectively from their highs this year. In addition, interest rates remain at historic lows and there are no signs that they will increase.

"Investors are desperately seeking returns as they have suffered significant losses in the equity markets over the last few years and this has meant that they have a reduced appetite for risk", said a Dublin-based fund manager. "The collapse of the banks has dented retail investor confidence as most saw the banks as a safe haven. But with bank interest rates only going lower, the bond market is seen as the only relatively safe option."

This change in investment appetite has seen a huge increase in interest in the bond markets. In the UK, where figures are available, corporate bond funds have seen a £65bn inflow from private investors in the last 10 years. And bond funds now account for one in three funds bought by UK private investors. According to the Investment Management Association, which represents the UK investment management industry, in August net retail sales of bonds were £1.2bn, the highest since May 2009. Equities followed at a significantly lower £479m.

However, UK portfolio managers are starting to advise clients to be wary of the bond market as demand continues to outstrip supply.

Just last week, Bank of Ireland issued a new bond and demand for it far outstripped supply. Although the bank had to pay a premium to borrow €750m in the bond markets, there was over €1bn bid.

And this demand is visible across the entire bond market. So far this year, European high-yield bond volumes have already reached €34bn, ahead of the €32bn for all of last year. September has been the busiest month in the leveraged buyout market for two years, with €4.1bn in loans issued.

A London-based senior bond portfolio manager said: " There is so much money chasing deals it feels like investors don't care what it is they are investing in. They just need a home for their cash. In markets like these, it is retail investors who always lose out."

Despite this significant worry that bond markets are starting to overheat, there is still difficulty facing weaker economies trying to raise funds in the bond markets. Yields on Irish, Greek and Portuguese bonds have soared as worries about the state of these economies heighten. As Greece warned last week that the country was still in danger, yields on bonds there soared to over 10%.

Bond yields in Ireland are now over 7% as investors are concerned about the country's decision to slash public spending which could choke off growth. The Irish government has already had to cancel its bond auctions for October, November and December as the rates it would be forced to offer are too high. According to a Dublin private wealth manager, this has resulted in a traditional "flight to quality", where investors favour US treasuries and gold. However, he believes these two assets are now also overvalued because of unreasonable levels of demand. Gold is now trading at $1,330 per ounce.