European corporate bonds slipped on Monday amid subdued trading, as bonds of major US auto makers extended declines on investor concern over declining market share and the pace of economic growth. Bonds of Ford traded five basis points wider on continued concern over news last week it will help former unit Visteon Corp restructure. There was also unconfirmed market talk of a new two-year dollar-denominated floating-rate note from the company.
Ford's 4.875 percent euro bond due in January 2010 was bid 5 basis points wider bid at 228 basis points more than government debt. Rival General Motors saw its 8.375 percent euro bond due in July 2033 move seven basis points wider t 460 basis points over Bunds, the trader said.
"Its the quietest day with have seen for a long time," said an auto trader. "We are still seeing some real money selling pressure as a hang-over from last week but basically there is no news to move the market."
Longer-dated European bonds fell last week after Italian telecom company Telecom Italia sold a 50-year bond, the first of its kind in euros, that was poorly received by investors. Auto makers and utilities were worst hit.
The Telecom Italia 50-year paper was bid four to five basis points wider at 120 basis points over the French 50-year government bond by around 1525 GMT, said a trader.
"Everyone is trying to get rid of these bonds but there is no liquidity. The Bund future is falling every day and real money is waiting on the sidelines," he said.
Before a stabilisation in the underlying government bond market trading volumes would remain thin and mainly street-driven, he said. Government bonds have declined in recent days amid concern over rising oil prices and falling equities.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 40.1 basis points more than similarly dated government bonds at 1532 GMT, 0.3 basis points more on the day and its first close above 40 since February 21.
In ratings news, German utility E.On's bonds slipped as Standard & Poor's revised its outlook on the company's AA- rating to negative from stable, saying it was concerned that the company's risk profile could deteriorate. E.On's 5.75 percent euro bond due 2009 was bid two basis points wider on the day at 1540 GMT, a trader said, at 30 basis points over Bunds.
In the high-yield market, Denmark-based pharmaceuticals company Nycomed is expected to sell a 400 million euro pay-in-kind note to fund its take-over by Nordic Capital Fund V. A market source said on Friday the note, due September 2013, would be priced on Monday.
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