Reuters
US Corp Bonds-Spreads wider on weak auto sales
Wednesday February 4, 5:53 pm ET
NEW YORK, Feb 4 (Reuters) - U.S. corporate bond spreads extended two weeks of widening on Wednesday as slow auto sales and relatively heavy supply in the junk market led Wall Street investment houses to mark risk premiums higher.
"Investors have been pretty quiet today, so it's just the Street driving spreads wider," a trader said, referring to Wall Street dealers.
Corporate issuance was light as well, as investors digested Tuesday's $2.65 billion sale from Wachovia Corp. (NYSE:WB - News)
Corporate bond spreads have been widening as investors have grown increasingly skittish about how tight spreads have become. They have also fretted over the possibility the Federal Reserve will raise rates sooner than previously reckoned.
Recent weakness in the high-yield market has weighed on investment-grade spreads. The market has faced relatively heavy supply in the last week and a half from particularly low-credit issuers, and would likely be hard hit by any rate hike.
"High-yield bonds had their first weekly total return losses since August last week, so the high-grade market is to some degree reacting to that," said Jeffrey Rosenberg, head of credit strategy research at Banc of America Securities (News - Websites) .
Against this backdrop of spread widening, reports from auto makers on Tuesday that car sales were relatively slow did not help spreads, traders said.
Cold weather kept consumers away from dealerships in many parts of the country. Industry sales fell 0.7 percent to 1.13 million cars and trucks in January, for an annual rate of 16.1 million vehicles, unchanged from January last year.
Spreads on Ford Motor Co.'s (NYSE:F - News) 7 percent notes of 2013 widened 8 basis points, or 0.08 percentage point, to 228 basis points, according to MarketAxess.
Bond prices broadly fell on Wednesday as economic reports came in better than expected.
The Institute for Supply Management's business activity index for the giant services sector jumped to a record high of 65.7 in January from 58.0 in December, well above forecasts of 60.0. New orders also leaped, suggesting further strength ahead. |
