Bonds: autos decline as M&S pares gains

Autos credits led European corporate bonds lower on Thursday amid subdued trading, while Marks & Spencer pared earlier gains on wariness over further bids for the British retailer.
German carmaker Volkswagen saw its bonds consolidate recent declines after some investors dumped existing maturities to free up funds for a two-tranche issue launched on Thursday.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 53.5 basis points more than similarly dated government bonds at 1450 GMT, 0.4 basis points lower on the day.
"Apathy is driving the market and pushing auto spreads slowly wider," said one trader. "There are still various concerns about Volkswagen and we saw it drift in the secondary market."
General Motors' 8.375 bond due in June 2033 was trading about two basis points wider at 1415 GMT at a spread of 273 basis points more than German government bonds, the trader said.
Germany's Volkswagen AG successfully raised 2.25 billion euros in the bond markets, but analysts said questions remain over the health of Europe's largest carmaker.
The company's Volkswagen Financial Services AG unit sold a larger than expected 1.5 billion euro floating rate note due on 19 January 2007, priced at 42 basis points over three-month Euribor.
It also sold 750 million euros of a seven-year fixed rate note due 19 July 2011 at 78 basis points over swaps. The spread moved out to around 80 basis points following the deal, a trader said.
The board at Marks & Spencer rejected the latest bid from tycoon Philip Green. The cost of five-year insurance against a debt default by the company fell to as low as 185 basis points, from 250 basis points on Wednesday, before rising to close at 225 basis points, a trader said.
Green said he had not yet made a decision on whether to stay in the running after the company rejected his 9.1 billion pound bid, but said his banking partners Goldman Sachs and advisers Merrill Lynch would continue to lobby M&S shareholders.
Green told Reuters he would not change the terms of the offer or launch a hostile bid.
Investors now await M&S Chief Executive Stuart Rose's plans for the retailer, due to be unveiled on Monday. German utility RWE set terms for the exchange and buyback of its outstanding 2007 and 2008 euro bonds and the issue of a new 2014 bond, the banks managing the exchange said.