[conformist]

Many good points in the other comments. One important first-order aspect that is usually meant by “excess liquidity” is central bank stimulus: Central banks create more money (buy low risk assets) -> there is more money in the system that has to go somewhere -> more money in total has to go into riskier assets -> they are worth more. This is a very naive equilibrium argument, and the “excess” probably just means “unusually much”, nothing deeper or technical.