US Looks More Like an Emerging Market and Credit Can Benefit

US corporate bonds are trading at their highest valuations in decades, but to some investors and strategists, it’s partly an illusion fueled by government dysfunction, and company debt has room to rally more.

The gap between yields on blue-chip company debt and US Treasuries, a key valuation metric for corporate credit known as the spread, has hovered around 0.73 percentage point for much of the last week. That’s close to levels last seen in the 1990s. Typically, it’s a signal investors are confident that firms will be able to pay their obligations.