US corporate bond spreads widened on Friday after a weaker-than-expected jobs report sent Treasuries off to the races, leaving other bond sectors struggling to keep pace.
The 10-year Treasury yield crashed to 4.23 percent from 4.41 percent, after the Department of Labor said the economy added just 32,000 jobs in July, well below the expected 228,000.
Adding to the bad news, oil prices reached a fresh 21-year record on the NYMEX, although oil prices retreated a little bit later in the session.
Stocks reached new intraday lows for the year, as investors fretted that the economic recovery is not as robust as previously believed and corporate profit growth could slow.
Falling stocks could have helped push spreads wider on Friday. But spreads may have also widened on Friday because when Treasuries rise quickly, corporates often have trouble keeping up, strategists said.
If employment growth is slowing because productivity growth is accelerating, then corporate profit growth could continue to be solid, and corporate bond spreads could stay about where they are, said Kent Wosepka, who helps manage $4 billion of fixed income assets at Standish Mellon Asset Management in Boston.
Corporate bond spreads could catch up to Treasuries in coming sessions, said Krishna Memani, global head of credit strategy at Credit Suisse First Boston in New York.
In the primary market, investment-grade issuance was low this week, at just $6.4 billion, as the summer doldrums set in.
In the secondary market, Boston Scientific Corp's spreads narrowed a touch on Friday, after Standard & Poor's said a recent stent recall would not affect ratings and regulators said the company's recall efforts were adequate.
The company on Thursday said it was recalling an additional 3,000 of its Taxus drug-coated stents, which are used to clear and prop open clogged arteries.
The recall was the company's third in six weeks.
Spreads on the company's 5.45 percent notes of 2014 narrowed 0.03 percentage point to 0.90 percentage point on Friday.
On Thursday, spreads on the 2014 notes widened 0.07 percentage point to 0.93 percentage point.
In the credit derivatives market, Boston Scientific blew out on Thursday, but ended Friday essentially unchanged.
On Thursday, the cost of insuring Boston Scientific's debt against default for five years in the credit derivatives market rose 15 basis points to 60 basis points, or $60,000 per year for every $10 million of bonds insured.
Default protection at one point on Friday traded as high as about 65 basis points but narrowed by the end of the day, a trader said.