Bonds: Results boost Ford, euro index sets new record

Number two US car maker Ford Motor Co posted robust first quarter earnings on Wednesday, boosting the value of its euro bonds, while the average value of European corporate bonds touched a record intraday high.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 55.2 basis points more than similarly dated government bonds at 1504 GMT, 0.4 basis point less on the day. The index tightened to 51.9 basis points in afternoon trade, setting a new intraday record.
Corporate bond spreads have tightened as the supply of new investment-grade debt has remained low and hopes have continued to build that the US economy is on the road to a sustained recovery. Earnings announcements have also generally been positive, with few profits warnings emerging.
Ford said its first quarter net earnings more than doubled to $1.95 billion, or 94 cents a share, from $896 million, or 45 cents a share, a year earlier.
"There was quite a bit of volume after the Ford numbers came out," said a trader in London.
Ford's numbers come a day after General Motors, the world's largest auto-maker, posted forecast-beating results and raised its earnings outlook for the year.
Ford euro bonds tightened four to five basis points across the credit curve after its results, traders said.
Its 5.75 percent euro bond due January 2009 was traded at 160 basis points above government debt. The auto-maker also raised its full-year earnings forecast to between $1.50 and $1.60 per share from a range of $1.20 to $1.30 per share. The robust performance, buoyed by surprisingly strong gains in Ford's automotive business, comes as it struggles against cut-throat competition and a declining US market share.
"Ford's 2004 redemption's amount to $27 billion while bond debt issuance is planned to be at $8-10 billion, which should continue to support Ford's spreads (notably up to three-year paper given the supportive liquidity profile of Ford credit over this period)," Dresdner Kleinwort Wasserstein said in a research note.