US high-grade corporate bond spreads lowest since 1998 after Trump election

NEW YORK (Reuters) – U.S. investment-grade corporate credit spreads hit their lowest since 1998 this week in a sign of growing investor confidence in the U.S. economy and in line with a surge in other risk assets such as stocks after Republican Donald Trump’s election as U.S. president. 

The spread on the ICE BofA U.S. Corporate Index, a commonly used benchmark for high-grade debt, declined to 78 basis points on Thursday, its lowest since 1998. Spreads were at 86 bps at the end of last month.

Meanwhile, spreads in the ICE BofA U.S. High Yield Index, which tracks so-called junk bonds, dipped to 273 basis points on Thursday, their lowest since 2007, down from 288 bps at the end of October, LSEG data on Friday showed.

The moves come amid a sharp rally in equities markets after Trump won a second term as U.S. president in Tuesday’s election. His policies are largely expected to benefit corporations due to lower taxes and looser regulation.

The S&P 500 briefly touched the psychologically significant 6,000 mark for the first time on Friday.

Investment-grade credit index spreads narrowed 8 basis points over the week, which was the largest weekly narrowing for the index since June 2023, Daniel Krieter, director of fixed income strategy at BMO Capital Markets, said in a note on Friday.