The credit protection cost of Ford's finance arm fell on Wednesday after the surprise appointment of a new CEO, while General Electric's finance unit sold $2 billion worth of euro and sterling hybrid bonds.
Credit default swaps on Ford Motor Credit, or FMCC, fell as much as 10 basis points in intraday trading, a trader said, after parent Ford Motor said former Boeing executive Alan Mulally would take on the position of chief executive officer.
Mulally's arrival at Ford ends the troubled five-year stint of Bill Ford as the operational head of the iconic carmarker, founded by his great-grandfather. Ford Motor posted a $1.44 billion loss in the first half of the year, and its US sales this year declined by nearly 10 percent through August.
"The tightening is on the slightly positive news of the new CEO," said a car bond trader in London. By 1410 GMT, he said 5-year default swaps on FMCC had tightened 5 basis points to 303 basis points, meaning it costs 303,000 euros a year to insure 10 million of FMCC's debt against default.
In the wider credit market, the bellwether iTraxx Crossover index, made up mainly of high-yield credit default swaps, widened 7 basis points to a 241.5 basis point mid-price, a second trader in London said.
"The market lacked support this afternoon, I suppose we're seeing a bit of a correction from all the tightening," he said. The index had tightened about 10 percent from late August until Tuesday, ahead of a roll to a new contract on September 20 and with the hedging of structured credit products boosting the market.
In the cash bond market, Thames Water's existing long-dated sterling bonds weakened after German parent RWE AG unveiled a major financial restructuring to make Britain's largest water company financially independent, in preparation to sell it off by 2007.RWE said in a statement it would sell off 875 million pounds of Thames Water debt it owns, while Thames will issue new bonds, in "an important step" towards a stock market listing or trade sale.
The spread on Thames Water's 2032 sterling bonds widened about 5 basis points, to be bid at 80 basis points over equivalent UK government gilts, another trader said.
"There was a perception in the market that these bonds would be restructured and maybe bought back, and that clearly isn't going to be the case," he said.
Elsewhere in secondary bond trading, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 51.7 basis points more than similarly dated government bonds at 1500 GMT, 0.3 basis points more on the day.
In the primary market, GECC, the finance arm of US conglomerate General Electric, sold a 400 million sterling ($759 million) hybrid bond at 99.514 percent of face value, with a coupon of 5.50 percent, to yield 97 basis points over gilts, the lead managers said.
It also sold a 950 million euro ($1.22 billion) hybrid bond at 99.506 percent of face value, with a coupon of 4.625 percent, priced to yield 62 basis points over mid-swaps. Both are 60-year bonds, not callable for the first 10 years.
The spreads are tighter than initial guidance for about 100 basis points over gilts and "mid-60s" basis points over mid-swaps, usually a sign of good investor demand.
Comments
Comments are closed.