The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 43.1 basis points more than similarly dated government bonds at 1543 GMT, 0.9 basis points less on the day, and a new lifetime low for the index.
The index hit a record high of 184.1 basis points in October 2002 but has since narrowed amid low interest rates and falling levels of default among Europe's top companies.
The DJ iTraxx index of European corporate five-year CDS maturing in March 2012 was trading at midday at 47 basis points, after a surge in issuance of collateralised debt obligations fuelled market activity, bankers said.
CDOs are baskets of assets that can be divided into tranches on which investors take credit risk. They are leveraged investments, meaning they are more risky but offer higher returns, and are attractive in low volatility or tight-spread environments.
The cost of default swaps falls as more market participants sell credit protection, a sign of rising risk appetite. Supply of euro-denominated corporate bonds fell 20 percent in January compared with the same period last year, said Societe Generale. This helped support demand for existing securities.
In the highly liquid auto sector, General Motors' 8.375 percent euro bond due in July 2033 traded about one basis point tighter bid at 389 basis points over Bunds, a trader said.
Telecoms bonds were around one basis point tighter after seeing more significant gains earlier in the day, said one trader in London.
France Telecom's 8.125 percent bond due in January 2033 was bid at 85 basis points over Bunds by around 1535 GMT, while trading as tight as 80 basis points over in the morning, he said.