Ford and General Motors bonds regain ground

Ford and General Motors' euro-denominated debt regained ground on Thursday afternoon, as investors reassessed the significance of Moody's cutting some of the car giants' credit ratings to "junk".
Moody's Investors Service cut both companies to "junk" late on Wednesday, citing the challenges they face in trimming high fixed costs to become more competitive over the long term.
But although Moody's also downgraded Ford's finance arm, Ford Motor Credit (FMC), which issues most of Ford's debt, it kept that on the bottom rung of investment grade.
"The bonds are bearing up extremely well - there's been a fairly constant and gradual tightening all day," said one London autos trader.
"There was an initial response as people saw a two-notch downgrade, but they then probably realised that was three months too late."
The downgrades came nearly four months after rival Standard & Poor's consigned the carmakers, two of the world's biggest corporate borrowers, to speculative grade, helping spark turmoil in the credit markets.
The Detroit duo's credit ratings have slid since the 1980s, as they have battled intensifying competition from Asian rivals and rising healthcare and pension costs.
General Motors' 8.375 percent euro bond due in July 2033 was bid at 86.5 percent of face value, and rival Ford's 5.75 percent euro bond due in January 2009 was bid at 94.5 percent of face value, traders said, both little changed.
Elsewhere, the market was sluggish, with investors waiting for September, when they expect a slew of new bond issues.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 37.4 basis points more than similarly dated government bonds at 1536 GMT, 0.1 basis point less on the day.
Telecoms bonds were little changed or marginally weaker, a second trader said, with Deutsche Telekom one of the worst performers.
Deutsche Telekom's 7.5 percent bond due January 2033 stood two basis points wider, bid at 99 basis points over government debt. Its bonds have fallen this week on worries it is looking to make a large acquisition, which would hurt its creditworthiness.
"We fear that DT's appetite for acquisitions has become substantially larger than we and the market have hitherto believed," analysts at Dresdner Kleinwort Wasserstein wrote in a note to clients.
The cost of insuring retailers' debt against default edged up, with more volatile or "higher beta" names most affected, a third trader said.
French retailer Casino was one of the weakest names, with its five-year credit default swaps rising 3 basis points, bid at 101 basis points, the trader said.