US corporate bonds were steady to a bit stronger on Friday after a weak jobs report suggested inflation remains tame and consumer confidence in January rose to the highest level in more than two years. The US economy added a modest 111,000 jobs in January, the Labour Department said on Friday.
A separate report found consumers, whose spending fuels two-thirds of economic growth, were more upbeat last month than at any time since December 2004. High-grade corporate spreads have narrowed to about 88 basis points from 91 basis points at the end of last year, while high-yield spreads shrank nearly a quarter-percentage point to 266 basis points, according to Merrill Lynch data.
"Spreads are trading in a narrow range and are almost as narrow as they can go," said John Tierney, a credit strategist at Deutsche Bank in New York. "The economic news has not been bad enough to push spreads wider and hasn't given investors a reason to lighten up in credit at this point."
The Reuters/University of Michigan Surveys of Consumers said its final index on consumer sentiment in January rose to 96.9 from 91.7 in December. Also this week, the Federal Reserve on Wednesday kept its benchmark rate unchanged, suggesting inflation remains tame.
Among movers on Friday, Anadarko Petroleum Corp's bonds gained after the oil and gas producer said it would sell stakes in some natural gas properties for $860 million. Spreads on its 5.95 percent notes due in 2016 tightened by 1 basis point to 124 basis points over Treasuries, paring gains after narrowing as much as 4 basis points to 121 basis points over Treasuries, according to MarketAxess. Anadarko Petroleum said on Friday that it would sell its stakes in some Oklahoma and Texas natural gas properties to EXCO Resources for $860 million.
The sale will bring Anadarko's total assets sales to $9 billion since it announced the $22.5 billion purchase last year of peers Kerr-McGee and Western Gas Resources. Bond prices for Abitibi-Consolidated and Bowater Inc also climbed to their highest level since September 2005 this week, on a plan to join the companies and create the world's largest newsprint maker. The deal could potentially save $250 million a year through cost-cuts.
Abitibi's 8.85 percent bond due in 2030 was little changed at about 92 cents on Friday, after climbing almost 7 cents this week, according to trades reported by MarketAxess. Among rating actions, Moody's Investors Service on Friday changed its rating outlook on movie theater operator Cinemark Inc to positive from stable, signalling an improved chance of a rating upgrade over the next 12 to 18 months.
The outlook change reflects the potential for additional debt reduction with proceeds from an initial public offering by Cinemark's parent, Cinemark Holdings Inc, Moody's said. Moody's rates Cinemark's debt "B1," the fourth-highest junk rating.
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