Euro-denominated bonds of Ford Motor Co gained on Friday in a thin market, outperforming rival General Motors, while in the high-yield market Germany's Hornbach-Baumarkt set a record low coupon with a new bond.
By 1530 GMT, Ford's new 750 million euro bond due 2010 sold on Tuesday was some 10 basis points tighter, bid at 166 basis points over Bunds, a trader in London said. "The Ford 2010 has been a bit of a stormer. A couple of hedge funds took a chunk of bonds," he said.
Ford's 5.75 percent euro bonds due 2009 also gained, rallying some six basis points.
But debt of rival General Motors Corp, while also making gains, was lagging, with its 8.375 percent euro bond due 2033 around three basis points tighter at 301 basis points over Bunds.
"People could well have been switching out of General Motors into Ford," the trader said.
All three of the major ratings agencies have recently downgraded General Motors while affirming Ford. For Moody's Investors Service and Fitch Ratings, this means that Ford is now rated one notch higher than GM. Standard & Poor's has both issuers at BBB-, the last rung on the investment-grade ladder.
Elsewhere action was extremely thin as the market took a breather between the US and French holiday on Thursday and the weekend, although the tone was broadly positive.
"We've done two or three trades all day," said one trader of industrial bonds. "There's no one around."
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 48.1 basis points more than similarly dated government bonds at 1605 GMT, 0.9 basis point less on the day.
German DIY store and garden centre operator Hornbach-Baumarkt set a record in the European high-yield market, achieving the lowest coupon ever with a 250 million euro 10-year deal that pays 6.125 percent.
The record was previously held by Vivendi Universal, which sold a bond in June 2003 to yield 6.25 percent.
"The market is on fire," said one banker familiar with the sale. "It was heavily oversubscribed."
The bond was priced at par via lead managers Deutsche Bank and Goldman Sachs.
S&P rates the bond BB-, three notches below investment grade. Moody's has assigned an equivalent rating of Ba3 to the bond.
Elsewhere, Finnish engineering firm Metso on Friday wrapped up its debt exchange, lengthening its maturity profile.
The firm issued a new 274 million euro 5.125 percent bond due 2011. The bond was priced at 165 basis points over mid-swaps, managers Deutsche Bank and Merrill Lynch said.
Metso said it bought back 256.1 million euros of its existing 6.25 percent bond due 2006, of which 412 million euros were outstanding. These bonds were bought back at a spread of 55 basis points over German government bonds.
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