Firm US payroll data helped European corporate bonds edge higher in average value on Friday, allaying fears of rapid US interest rate rises but reassuring investors that economic growth is sustainable.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 56.9 basis points more than similarly dated government bonds at 1507 GMT, 0.4 basis points less on the day.
"It's more a relief rally that the numbers were not ridiculously higher or ridiculously lower than expected," a trader in London said.
The US Labour Department said US employers added 248,000 jobs in May, slightly more than many in the financial markets had expected. It built on two previous months of strong numbers.
Investors were watching the report for any indication that it could cause a change of policy by the US Federal Reserve, which is widely expected to raise interest rates soon.
A Reuters poll of US economists had projected a rise of 216,000, although some players were betting on a higher number of 400,000 or more.
"We may now expect some tightening in the higher beta names that have been risk proxies," said Suki Mann, credit analyst at Societe Generale in a note.
General Motors' 8.375 percent euro bond due July 2033 is one example of such a bond. It was two basis points tighter at 269 basis points over German Bunds at 1445 GMT.
Ford's 5.75 percent euro bond due January 2009 was also two basis points tighter at 165 basis points over government debt, although some investors made use of the rally and sold into the stronger market, the trader said.
Elsewhere, Stora Enso, the world's top paper and board maker, will offer new euro bonds maturing in 2014 at 68 to 78 basis points over mid-swaps in exchange for bonds maturing in 2007, the banks managing the deal said.
Parmalat's bonds were bid around 17 percent of face value on Thursday, which is almost double the lows reached as the company's accounting scandal came to light in December.
Elsewhere, Slovak electricity generator and supplier Slovenske Elektrarne sold a 200 million euro seven-year bond on Friday, the banks managing the sale said.