Corporate bonds steady, new issues pile up

The average value of European corporate bonds were mostly unchanged on Tuesday, with new issues from the highly rated end of the credit curve building in the pipeline.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average of 62.1 basis points more than similarly dated government bonds at 1603 GMT, 0.2 basis points more on the day.
Vodafone's 4.25 percent euro bond due in May 2009 was bid at 61 basis points above government debt in the afternoon, or six basis points tighter, after the world's biggest mobile phone company pulled out of a potentially costly take-over battle for AT&T Wireless in the United States.
"Vodafone bonds took the street somewhat tighter earlier in the afternoon," said a bond trader in London.
Moody's Investors Service cut Finnish engineering group Metso's long-term ratings to Ba1, the highest speculative-grade rating, from Baa3.
Metso is the world's biggest supplier of machinery to the forestry industry. The downgrade reflects Metso's continued weak operating performance in 2003, resulting in depressed margins and cash flows in the company's core businesses, Moody's said.
Metso 2006 bonds were bid around 240 basis points over German Bunds at 1510 GMT, 20 basis points wider on the day.
"It was wider after the downgrade, but I think people are short on the bond so it's come back again," one trader said.
Moody's outlook on the ratings is negative, which means it may cut Metso's ratings further.
Standard & Poor's rates the company at BBB, two notches above "junk" status, but is also considering cutting the rating. On February 13, it said it might cut Metso's A-3 short-term rating, indicating that the long-term rating might be cut by more than one notch.
Meanwhile a raft of new investment grade issues are set to hit the market.
German re-insurer Hannover Re will price its 20-year bond to give a spread of around 170 basis points over 10-year mid-swaps, an investor said on Tuesday.
The company plans to sell around 750 million euros ($638 million) of subordinated debt, the investor said.