US corporate bond spreads held steady on Friday as investors started to shrug off long-running concerns about Greece's debt problems, analysts said. Escalating worries about the high debt load of several European countries and the potential impact on the global economy have periodically weighed on corporate bond prices in recent weeks.
But traders and analysts said US investors are starting to turn their gaze away from Greece's debt imbroglio and resume their hunt for assets that yield more than cash or Treasuries, despite the higher risks.
"The Greece issues are not impacting individual credits within our market. You have the overtones of uncertainty, but overall our credit market remains very strong," said Sean Simko, fixed-income portfolio manager with investment management company SEI in Oaks, Pennsylvania.
Germany on Friday appeared to soften its resistance to an International Monetary Fund solution for Greece's debt, raising hopes for a financial safety net for the European Union's most heavily indebted member. "People have come to the conclusion that the IMF will likely step in and bail them out," said Bob Gorham, managing director and head of investment-grade bond trading at Broadpoint Capital in New York.
Helped by that prospect of slight relief, yield spreads of corporate bonds over comparable Treasuries were unchanged or about 2 basis points tighter, Gorham said. Overall, the tone in higher-rated US corporate bonds remains robust, with yield spreads over government bonds at their narrowest in more than two years at 169 basis points as of Thursday, according to Bank of America Merrill Lynch data.
However, some of the new debt issues sold this week "are not faring so well because I think they got priced too aggressively," Gorham said. Spreads of Hartford Financial Services Group Inc's 10-year notes, which were priced to yield 185 basis points more than US Treasuries when sold on Thursday, widened to about 191 basis points on Friday, according to MarketAxess.
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