Investment research house Morningstar has underlined the liquidity squeeze in credit markets, in a report that says some fixed income managers are increasing their sell spreads to unprecedented levels.Among Australian bond funds, at the extreme AMP Capital has increased the sell spread on its AMP Capital Wholesale Australian Bond Fund from 10 basis points to 90 bps. Vanguard has increased the spread on its Australian Inflation-Linked Bond Index Fund by the same amount.Among global funds, Macquarie has increased the sell spread on its Macquarie Dynamic Bond Fund from eight bps to 124 bps.And among multi-strategy income and more flexible bond funds, the spreads have gone very wide. Kapstream has increased the sell spread on its Absolute Return Income Plus Fund from 10 bps to 200 bps.The spread on the Payden Global Income Opportunities Fund has increased from 10 bps to 195 bps.Morningstar says: "What's particularly vexing is the question of accessibility. It's fair to think that investors would have some expectation of being able to liquidate their bond portfolio without fear of incurring a major cost, irrespective of the market conditions. "Automatic asset allocation rebalancing could be particularly problematic, as significant falls in equity allocations during the March quarter are likely to be re-weighted back by selling fixed interest exposures."In its commentary on the market, Morningstar said: "Instability in credit markets has seen a flight to the safety of high-quality more liquid securities. Credit spreads have widened, especially further down the quality spectrum, and credit issuance has softened."High-grade sovereign bonds have outperformed credit."