Corporate bonds edge marginally lower

European corporate bonds edged marginally lower in value on Tuesday as some investors looked to take profits after the gains of the last few days, but traders said activity was extremely quiet.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 62.0 basis points more than similarly dated government bonds at 1629 GMT, 0.4 basis points less on the day.
Despite continued good news on the corporate front, with both Renault and Philips beating analysts' expectations with their results, most prices drifted gently lower over the course of the session.
"We've seen a little bit of profit taking, but flows are very modest. Overall we're one to two basis points wider," said one trader of industrial bonds.
"Bids are improving a little now, but only a little," he said. "There's a theme of most companies reporting positive news, but that's what people expect them to do," the trader said.
Philips said on Tuesday it returned to the black in 2003, with net profit well up on forecasts, while Renault's profits also beat expectations thanks to its stake in Japan's Nissan and the success of its revamped Megane range.
Bonds in the two most liquid sectors of the European corporate market - auto-makers and telecoms operators - edged wider, traders said.
Telecom Italia gave up the gains it made on Monday, a trader said, to end the day some three to four basis points wider. Bonds of Vodafone Group Plc initially traded lower before rebounding, a trader said, as speculation continued over the company's acquisitive intentions in the US
Meanwhile, autos too were wider, mainly driven by Ford Motor Co and General Motors Corp, although activity was extremely thin, another trader said.
High-grade supply continued apace on Tuesday, while the corporate investment-grade new issues market remains moribund.
Italy offered the biggest deal of the day, launching a five billion euro inflation-linked bond due 2014, set to be priced on Wednesday. A source said that orders for the bond had already reached seven billion euros.
Barclays Capital, BNP Paribas, Citigroup, Goldman Sachs and UBM are leading the deal.