US Investment-Grade Credit Spreads Reach Historic Lows
The US investment-grade credit spreads have reached their lowest level this century, driven by a combination of factors including low net issuance, strong investor demand, and favorable macro-policy expectations. According to Guggenheim, the spreads have tightened to around 287 basis points, nearing their 2021 lows.
The factors driving this decline include very low net issuance, with refinancing driving 72% of primary market activity, and strong investor demand, which has continued to tighten spreads towards the lows last seen in 2021. Additionally, Fed easing expectations and robust economic data have contributed to the decline in spreads.
The convergence of supply scarcity, strong demand, and improving credit quality has created a classic ‘tight-spread’ environment, with each element reinforcing the others. The result is the current historic low in US investment-grade credit spreads, which is expected to have a positive impact on the overall bond market.
Key Quantitative Milestones
- IG spread level: ~287 basis points (bps) in mid-Oct 2024, nearing their 2021 lows.
- High-yield CCC spread: ~444 bps (2021 low).
- Net primary-market issuance: 72% of 2024 activity was refinancing-driven, indicating a thin issuance pipeline.
- Rating actions: 130 upgrades vs. 76 downgrades (Q4 2024).
- Default rates: 1.4% 12-month high-yield default (well below the 4% long-run average).
- Total return: 7.77% for the Bloomberg U.S. IG Corporate Bond Index in 2025 (tightest spreads in two decades).
Sources
- Guggenheim Investments, High Yield Corporate Bonds: Spreads are Nearing Historical Lows (PDF, 10 Oct 2024) – https://www.guggenheiminvestments.com/GuggenheimInvestments/media/PDF/FISV-Q4-High-Yield-Corporate-Bonds-Spreads-are-Nearing-Historical-Lows.pdf
- Breckinridge Capital Advisors, Q1 2026 Corporate Bond Market Outlook (12 Jan 2026) – https://www.breckinridge.com/insights/details/q1-2026-corporate-bond-market-outlook/