Stocks rattle European corporate bonds

European corporate bonds traded lower in average value on Tuesday as Wall Street and European shares declined. Both auto and telecom bonds were hit, but new issues offset some of the negative tone in the market. The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 49.0 basis points more than similarly dated government bonds at 1604 GMT, 0.8 basis points more on the day.
"Stocks are much lower today and that is following through to credit, and particularly autos," said a trader in London. "That sentiment has pushed through to telecoms which are slightly down on the day."
General Motors' 8.375 percent euro bond due in July 2033 was 10 basis points wider on the day at 315 basis points over government debt.
Its rival Ford's 5.75 percent euro bond due in January 2009 was six basis points wider at 157 basis points over government debt.
The spread on France Telecom's 8.125 percent bond due in January 2033, one of the most liquid in the sector, widen around two basis points to 104 basis points over government bonds, the trader said.
Bonds of Vodafone were little changed after tightening in the lead-up to its results, published on Tuesday, the trader said.
Danish telecom operator TDC became the latest issuer to announce places to exchange short-dated debt for longer-dated bonds.
TDC offered to exchange up to 700 million euros of its 5.875-percent bond due April 2006 for a new fixed-rate bond due 2011, dealer manager Citigroup said on Tuesday.
TDC said in a statement it was aiming to lengthen its debt maturity profile while taking advantage of current market conditions.
TDC is offering to buy back the existing bonds, of which 1.35 billion euros are outstanding, at a spread of 13 basis points over the 5 percent German government OBL due February 2006, the bank said. The bonds were trading at 31 basis points over government debt before the offer, a trader said, but that had fallen to 18 basis points by late on Tuesday.
The telecoms operator will offer the new seven-year bond at 50 to 60 basis points over the swap rate. The new bond must total at least 300 million euros for the exchange to proceed, Citigroup said.
Germany's Deutsche Telekom and the UK's Network Rail were selling benchmark size euro and sterling deals respectively.
The 2015 issue, worth at least 500 million pounds, has price guidance of 25-27 basis points over UK government bonds, while the 2035 issue, also worth at least 500 million pounds, has price talk of 26-28 basis points over Gilts, another source said on Monday.