Auto bonds trod water in Europe on Wednesday as General Motors weighed in with second-quarter results, while the high-yield market was buoyed by results from Ericsson and Colt, as well as a trading update from Invensys.
Auto giant General Motors Corp posted higher quarterly earnings, boosted by record results at its credit arm and stronger profits at its core automotive business. Second quarter earnings rose to $1.34 billion from $901 million.
The credit market gave the results a lukewarm reception, however. "GM initially tried to go tighter but then we saw some selling into the bid," said one trader. "The rest of the sector is ending the day unchanged - Ford is still wider following its results yesterday."
General Motors' 8.375 percent euro bond due in June 2033 was bid at around 273 basis points over Bunds at 1415 GMT, unchanged on the day, the trader said.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 52.2 basis points more than similarly dated government bonds at 1450 GMT, 0.3 basis points more on the day.
Swedish telecoms equipment maker Ericsson and Britain's Colt Telecom Group Plc gave the high-yield market an early lift as the former beat forecasts and the latter met expectations after a profit warning earlier this month.
The cost of insuring against a default by Ericsson snapped lower at the start of the session and stayed there, trading around 157 basis points by mid-afternoon, versus around 170 basis points on Tuesday. Second-quarter pre-tax profit was 7.8 billion crowns, zooming past a forecast of 5.5 billion.
Colt's euro-denominated bonds due 2009 rose one point, and the cost of insuring its debt fell, although the recovery was muted. The euro bonds, quoted at 93-94 percent of face value on Wednesday, were at par before the company's profit warning early this month.
"Colt is free cash flow positive this quarter and has been for 12 months now - so from a credit point of view it's doing fairly well," a trader said.
British engineer Invensys said its key markets were showing encouraging signs that the firm had reduced net debt since it announced annual results in May.
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