US corporate bond prices fall

US corporate bond prices fell on Friday, tracking declines in stocks after J.P. Morgan Chase & Co reported deep fourth-quarter loan losses. Spreads on bank bonds widened the most over comparable Treasuries of any sector, with some credits widening as much as 9 basis points, traders said. Corporate bond spreads overall were between 2 and 4 basis points wider, they said.
The cost to insure corporate debt against potential default rose, with the main index of investment-grade credit default swaps rising by about 4 basis points to 84 basis points, according to data from Markit Intraday. Falling stocks and worry about next week's earnings reports from banks spooked many investors who moved into safer securities such as Treasury bonds.
Andrew Brenner, head of emerging markets sales and trading at Guggenheim Securities in New York, said investors were also continuing to lock in gains after the recent rally. "Things had gotten a little too far too fast and guys have been taking a little bit of a step back," Brenner said. Spreads on J.P. Morgan's 6.3 percent bonds due 2019 rose 5 basis points to 116 basis points over Treasuries, Brenner said.
Bank of America's 6.5 percent bonds due in 2016 widened 9 basis points to 122 basis points over Treasuries, according to MarketAxess. Bank of America is set to report earnings next week. Among new debt sales, Banco do Brasil sold $1 billion of notes in a two-part sale, said IFR, a Thomson Reuters service.
The deal includes $500 million of five-year notes that priced at 220 basis points over Treasuries and $500 million of 10-year notes that priced at 237.5 basis points over Treasuries. Global high-yield debt sales hit a record $11.7 billion this week, according to Thomson Reuters data, as companies rushed to issue debt while borrowing costs were still low.
That surpassed the previous record, set during the week of November 5, 2006, when $11.4 billion was sold. A full $14.4 billion of junk bonds have been sold so far in January, marking the biggest start to the year for this type of debt since records began in 1980, Thomson Reuters data showed.