New deals dominated the European corporate bond market Tuesday with General Motors's euro denominated bond sale expected to shift fourth quarter issuance into gear.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 46.1 basis points more than similarly dated government bonds at 1500 GMT, 0.5 basis point less on the day.
"The GMAC deal is reportedly going so well, that it is giving the whole auto sector a boost," said a bond trader in London. Euro-denominated bond of US auto giants GM and Ford are the most widely traded bonds in Europe.
General Motors Acceptance Corporation, the funding arm of US car giant General Motors Corp, saw price talk on its planned euro-denominated bonds tighten earlier on Tuesday amid heavy investor demand for the deal.
Sources said GMAC would sell two billion euros worth of five-year fixed bond at a spread of around 128 basis points over mid-swaps, seven basis points tighter than earlier indications.
"We are still seeing a big structural bid as well, because so many people are short," the trader said on Tuesday afternoon.
The General Motors funding unit also expects to sell a three-year floating rate note at around 88 basis points over three-month Euribor, again seven bps tighter than previous guidance, a source close to the deal said on Tuesday morning.
General Motors' 8.375 bond due in June 2033 was about four basis points tighter at 262 bps over Bunds at 1430 GMT, the trader said later on Tuesday.
Its rival Ford's 5.75 percent bond due in January 2009 was also trading about three basis points tighter on the day at 111 bps over government securities, he said.
The amount of orders received for the new GMAC issue already reached in excess of four billion euros by Tuesday morning, the source close to the GMAC bond sale said earlier.
Barclays Capital, Commerzbank and Deutsche Bank are the lead managers of the latest GM bond.
GMAC and General Motors are rated BBB by credit rating agency Standard & Poor's and A3 by Moody's Investors Service.
The high yield pipeline was also active on Tuesday. Czech mobile phone operator Cesky Mobil plans to issue a high-yield euro-denominated bond this or next month as part of a 500 million euro loan refinancing package, a banking source said on Tuesday.
UBS and JP Morgan are working on the deal's bond component, which is expected to be worth around 350 million euros, the source said.
Cesky Mobil, the smallest of the Czech Republic's three mobile operators, would not comment. A company official in Prague refused to either confirm or deny the company is in the market for a refinancing package.
The operator is majority-owned by Canada's Telesystem International Wireless Inc.
In the mortgage-backed market, GM's financing arm RMAC has set price talk on its 500 million pound equivalent multi-currency home loan backed bond. The deal is scheduled to price on Thursday or Friday.
Other upcoming issuers include British online bank Egg, which is marketing a 500 million pound UK credit card receivable backed bond.
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