US corporate bonds: Telecoms tighter after AT&T cut

Yield spreads on investment-grade telecom companies narrowed on Friday, as investors shuttled money out of the recently downgraded AT&T debt and into other telecom companies.
Spreads were otherwise stagnant in the US corporate bond market, as stock indexes were mixed and few major bond issuers reported earnings.
In the new issue market, PanAmSat Corp sold $1.01 billion of 10-year junk bonds at par to yield 9 percent, or 4.51 percentage points more than Treasuries, a market source said.
The issue rose in preliminary secondary market trading, with dealers quoting prices around 101 cents on the dollar.
PanAmSat is selling the notes as part of Kohlberg Kravis Roberts & Co's $3.55 billion leveraged buyout of the satellite operator.
Meanwhile, in the secondary market, spreads on bonds of telecom companies including Verizon Communications Inc, BellSouth Corp, and Sprint Corp narrowed a day after Moody's Investors Service cut AT&T Corp's debt ratings to junk.
Moody's on Thursday cut AT&T's senior unsecured debt ratings to "Ba1," the highest junk rating, from "Baa2."
That rating forces investors not authorised to hold junk bonds, and investors who benchmark their performance against an index of investment-grade securities, to sell their AT&T holdings.
Spreads on AT&T's six percent notes due 2011, which do not have so-called step up provisions, widened 0.15 percentage point to 3.55 percentage point.
The coupons on step up bonds automatically rise if the company is downgraded.
Meanwhile, spreads on Sprint Capital Corp's 8.375 percent notes due 2012 narrowed 0.04 percentage point to 1.09 percent.
Spreads on Public Service Enterprise Group's bonds drifted wider after the company reported a 7 percent decline in quarterly earnings, and cut its earnings forecast for the rest of the year.
Fitch said it may cut the utility holding company's "BBB-plus" senior unsecured ratings after the news, while S&P revised the outlook on the company's long-term ratings to negative from stable.
The company's notes only edged wider on the news because trading was so slow on Friday, but could widen further on Monday, a trader said.
PSEG Power's 5 percent notes due 2014 were bid at a spread of around 1.30 percentage points over Treasuries, versus a bid of 1.25 percentage points at the open.