European corporate bonds struggled through a thin session on Tuesday as the Christmas break loomed, but funds getting a head start on putting next year's money to work supported prices. The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 48.1 basis points more than similarly-dated government bonds at 1545 GMT, unchanged on the day.
Euro-denominated bonds of US auto maker General Motors slipped a fraction after reports in Italian newspapers that Citigroup had estimated it would cost the US auto-maker up to $3.6 billion to scrap its put option with Fiat.
"The nervousness is going to remain," said one trader. "It's not really new news but when headlines keep being reissued it stays in the spotlight. People can't get overly bullish on the GM curve simply because this story is going to persist," he said.
GM's 8.375 percent bond due 2033 was around a basis point wider at 348 basis points over government bonds on Tuesday.
But while GM paper remained weak traders reported buyers of bonds issued by European auto-makers including Volkswagen, BMW and DaimlerChrysler. Telecom traders also reported scattered buying interest.
"Funds get a lot of new money in January and we're already seeing that being put to work pre-emptively," said the trader.
Elsewhere, Vivendi Universal intends to reimburse some 400 million euros ($535.5 million) in high-yield bonds on January 21, 2005, the French media company said on Tuesday.
Vivendi said in a statement that the move, which follows the sale of 15 percent of Veolia Environnement, showed its continued commitment to the efficient use of funds, adding that it would have no more outstanding high-yield notes after the transaction.
Vivendi regained its investment-grade ratings earlier this year after cleaning up its balance sheet and streamlining its business.
Bonds of German high-tech engineering company Jenoptik were steady as the company said it expected 2005's sales and operating earnings to be at least high as 2004's despite an expected downturn among chipmakers, who are its main customers.
In the primary market, French unemployment benefit fund UNEDIC plans to launch a 2.2 billion euro bond, lead managers for the deal said on Tuesday.
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