Corporate borrowing costs fell this week to the lowest level since October amid signs that government efforts to repair broken credit markets are working, Bloomberg reported.

The extra yield investors demand to own corporate debt instead of Treasury securities fell to 698 basis points as of yesterday from the December peak of 896 basis points, according to Merrill Lynch & Co. Inc.’s U.S. Corporate and High Yield index. That represents an average yearly company savings of $19.8 million for every $1 billion of bonds sold.

The cost for companies to borrow money has fallen amid speculation that the economy’s decline has reached a bottom, spurring investors to buy riskier debt with higher yields, said Bill Larkin, a portfolio manager at Salem, Mass.-based Cabot Money Management, which oversees $500 million in assets.

The Federal Reserve and U.S. government have pledged $12.8 trillion to boost the economy and consumer spending.

“It looks like we’re in or coming out of that bottoming process, which is healthy for corporate bonds,” Larkin told Bloomberg. “The risks of another blowup are falling.”

Investment-grade yields relative to benchmark rates fell 12 basis points this week to 520 basis points as of Thursday, the lowest since Feb. 16, according to Merrill’s U.S. Master Corporate index.

Overall investment-grade yields fell 0.12 percentage point to 7.51 percent, according to the Merrill index.

Interbank lending spreads fell to the lowest this week since before the collapse of Lehman Bros. Holdings Inc., signaling that efforts by Federal Reserve Chairman Ben S. Bernanke to restore credit markets may be working, Bloomberg said.