A major gauge of U.S. corporate bond valuations has climbed to its highest level in nearly 30 years, as investors scramble to secure still-attractive yields amid speculation that the Federal Reserve could start cutting interest rates as early as next month.
The extra yield investors earn for holding investment-grade corporate bonds over Treasuries narrowed to just 73 basis points on Friday, marking the lowest level since 1998, according to Bloomberg index data.
This sharp drop signals that corporate bonds have become unusually expensive, as buyers rush to lock in current interest rates despite mounting economic uncertainties and ongoing trade tensions. Many bond traders are wagering that the Fed will soon shift its stance, cutting rates as soon as next month, after recent economic reports showed inflation largely in line with expectations and signs of a cooling labor market.
Average investment-grade yields have hovered above…
