US corporate bond spreads widened more on Friday after climbing to a five-month peak on Thursday as oil prices hit a record high and a US manufacturing survey showed signs of inflationary pressures. A weaker-than-expected jobs report at first eased worries about interest rate hikes, but those worries resurfaced after a factory survey showed strong growth in prices, a possible sign that inflationary pressures are building. "You had a lot of conflicting data, but after tightening in the morning, things seem to be trending a little wider going into the afternoon," said Rizwan Hussain, credit strategist for Morgan Stanley.
NYMEX May crude oil futures rose $1.87 to settle at $57.27 a barrel after earlier hitting a record of $57.70. High oil prices could hurt corporate earnings by raising fuel costs for many companies and curbing consumer spending.
Closely watched March US vehicle sales were mixed, with Ford Motor Co reporting a disappointing 5.1 percent drop in car and truck sales, while General Motors Corp's vehicle sales declined just 1 percent. Debt analysts had expected a 1 percent to 4 percent decline at GM. "There was a lot of uncertainty and speculation going into GM's numbers, and it seems like they performed at the higher end of expectations," said Timothy Patrick, global head of high-grade research for Banc of America Securities.
Spreads on Ford Motor Credit's 7 percent notes due 2013 widened by 0.07 percentage point to 3.02 percentage points more than Treasuries, according to MarketAxess.
Spreads on GM's benchmark 8.375 percent bonds due 2033 widened by 0.11 percentage point to 5.20 percentage points more than Treasuries, MarketAxess reported. That spread is 0.35 percentage point wider on the week.
Corporate spreads overall have widened by 0.12 percentage point this month, with the average corporate bond now yielding 0.93 percentage points more than Treasuries, the widest spread since October, according to Merrill Lynch.
Spreads on junk bonds have surged by nearly 0.70 percentage points to 3.52 percentage points more than Treasuries, while on a total return basis, junk bonds have booked a 2.7 percent loss.
GM's sliding ratings, a pickup in leveraged buyouts and interest rate worries have pushed spreads wider this month.
In other markets, prices of benchmark 10-year Treasuries rose 8/32, yielding 4.45 percent, as a slide in stocks raised the appeal of safe-haven government debt.