One positive economic indicator? Narrowing corporate bond spreads

Investors have been keeping track of falling government bond yields over the last few weeks, especially since bond markets have been sending signals that investors expect the Federal Reserve to cut interest rates later this month.

Meanwhile, corporate bond yields have been sending signals of their own — about interest rates, yes, but also about where the economy is headed.

Corporate bonds are generally considered to be riskier than government bonds, since companies are more likely to run into trouble and default than the U.S. government.

As a result? "Investors want to get additional compensation to take on that additional credit risk," said Lawrence Gillum, chief fixed income strategist at LPL Financial.

The extra compensation that corporate bonds pay out compared to government bonds is called a spread, and those spreads can change.

"There's been times when spreads are lower, and obviously times when spreads are higher as well, this time being one of those times that spreads are lower," Gillum said.

In fact, spreads have been fairly low for most of this year. In other words, investors aren't demanding much extra compensation from companies.

It's a sign that investors think economic growth will stay strong and that companies will be in a good position to pay back their debt, according to John Canavan, lead market analyst at Oxford Economics.

"If that's the case, then you are optimistic about getting your money back," he said. "You are not going to demand as high a yield from these corporations because you believe your risk is a little bit less."

That means corporations themselves will find it easier and cheaper to borrow money. "If you're willing to give me $100 million at very friendly terms, then I can find ways to invest that, I can find ways to help build my company with that," Canavan said.

And that kind of investment can help the economy.