US auto giant General Motors once again stole the show in Europe's corporate bond markets on Friday, with its 30-year bond spreads widening nearly 30 basis points after it said it expected 2005 earnings to fall. Elsewhere, few names were moving although the cost of credit protection for British broadcaster ITV remained volatile after talk that US venture capital group Kohlberg Kravis Roberts may be interested in a bid.
The main mover of the day, General Motors' 8.375 percent euro bond due in July 2033, widened as much as 29 basis points to 399 basis points over Bunds, and ended the day at 392 basis points over, a trader in London said.
"There are no signs of any buyers even at these levels," the trader said. "Most asset managers have already got out and we are likely to see more volatility until real money decides there is enough bad news priced in."
Spreads tightened briefly, the trader said, after credit rating agency Standard & Poor's affirmed its BBB- rating on the auto maker, and retained its stable outlook.
"The affirmation follows GM's disclosure of guidance for 2005," S&P said.
GM said on Thursday it expects 2005 earnings to drop to between $4 and $5 per share, excluding any one-time items - down from its forecast $6 to $6.50 per share in 2004. The company expects to be hit by lower profits at its financial services unit and a $1 billion rise in health-care costs.
The car maker is due to report 2004 earnings on January 19.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 46.4 basis points more than similarly dated government bonds by the end of the trading day, one basis point more on the day.
Trade remained volatile in credit protection for ITV, owner of the television channel, which airs popular British soap operas Emmerdale and Coronation Street.
Five-year credit default swaps for ITV were at 60 basis points in afternoon trade, having been as high as 65 basis points earlier in the day, and up from 35 before the speculation of a bid from KKR began on Thursday, a trader said.
The price means it costs 60,000 euros a year to insure 10 million euros of the group's debt against default.
In the primary market, Irish packaging group Jefferson Smurfit Group (JSG) sold 695 million euros of high-yield bonds and pay-in-kind (PIK) notes to redeem existing debt and fund a payment to shareholders, a lead manager for the sale said.