European corporate bonds ticked higher in average value on Tuesday to track gains on US and European stock markets, but bond traders were reluctant to declare the rise a rally.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 57.2 basis points more than similarly-dated government bonds at 1501 GMT, 0.6 basis points less on the day. "We've seen some short covering but the rise follows gains in the stock markets," a bond trader in London said.
Widely traded euro-denominated bonds of US carmakers boosted the market overall, as their spreads over government debt tightened six to seven basis points on the day.
General Motors' 8.375 percent bond due in June 2033 was bid at 270 basis points over Bunds, and Ford's 5.75 percent bond due in January 2009 was bid at 156 basis points, traders said.
In the high-yield market, bonds of Dutch independent oil refiner Petroplus leapt higher in value by some 20 percentage points as the company's founders said they would take the firm private with the help of the Carlyle Group.
Petroplus said in a statement it would buy back its 10.5 percent senior notes due 2010 at 101 percent of face value, a premium of 39 percent to Monday's close.
By mid-afternoon, the bonds were bid at 93 percent of face value, up 20 percentage points, a trader said.
The move came in a high-yield market that was broadly performing better than in recent days, helped by news such as Moody's Investors Service's two-notch upgrade of engineering firm ABB to Ba2.
Five-year default swaps on ABB fell some 20 basis points to 210 basis points following the upgrade, traders said. The price means it costs 210,000 euros a year to insure 10 million euros of ABB debt against default.
Some traders, however, said they were disappointed that Moody's had assigned a stable outlook to ABB after the upgrade. ABB has said it hopes to return to investment-grade ratings this year.
British house-builder Taylor Woodrow Plc sweetened the terms and reduced the size of a 15-year bond to lure investors buffeted by the prospect of interest rate hikes and high oil prices.
The 200 million-pound bond was priced at 98.966 percent of face value to give a spread of 135 basis points over the 8.0 percent 2021 Gilt, at the wide end of the spread range announced earlier on Monday.