Bonds of Germany's Bayer AG rose in value early on Tuesday, as investors shrugged off a downgrade by credit rating agency Standard & Poor's, while auto bond traders were eagerly awaiting second-quarter results from Ford.
S&P lowered pharmaceutical and agrochemical conglomerate Bayer's long-term corporate credit rating to A from A+ late on Monday, citing Bayer's plans to buy the over-the-counter division of Swiss pharmaceuticals manufacturer Roche for 2.38 billion euros.
But Moody's Investors Service already rated Bayer lower at A3. Moody's affirmed its Bayer ratings earlier on Monday, as well as its stable outlook.
"Investors are taking the Moody's decision as the key event and ignoring the S&P announcement. However, volume is still thin at this time of the morning," a bond trader in London said.
Bayer's six percent euro bond due April 2012 was two basis points tighter on the day at 72 basis points over government debt, the trader said.
Bayer announced the Roche acquisition shortly after its decision to spin-off to shareholders its Lanxess chemical unit, which represents one-fifth of its sales. The deals would fuel a transformation of the 140-year-old Bayer.
S&P affirmed Bayer's short-term A-1 rating, but upgraded its outlook to stable from negative.
Elsewhere, auto bonds, among the most liquid in the European corporate bond market, traded slightly lower in value ahead of Ford Motor Co's second-quarter earnings, due for release later on Tuesday.
Ford's 5.75 percent euro bond due 2009 was bid at 141 basis points over government bonds by 0725 GMT, he said.