High-grade spreads edged out and junk bond prices slipped in the US corporate bond market on Friday on the general view that yield premiums will continue to rise to adjust for faltering credit conditions. "The rate of positive news in the corporate market is slipping," said Robert Millikan, director of fixed-income at BB&T Asset Management, in Winston-Salem, North Carolina. "Growth and earnings will likely slow." The market was hit with a slew of ratings downgrades on Friday, to cap a turbulent week that included earnings reports from top automakers General Motors Corp and Ford Motor Co. Auto bond spreads were mostly wider on Friday.
Standard & Poor's cut Eastman Kodak Co's debt ratings to junk after the photo giant reported a $142 million first-quarter loss.
S&P warned it may cut Kodak's ratings again if conventional film sales drop more quickly than projected this year, cash flow falters and digital operating income fails to hit targets, among other things.
Spreads on Kodak bonds due 2013 with a 7.25 percent coupon widened by 0.33 percentage point to 2.48 percentage points over Treasuries to yield 6.74 percent, according to MarketAxess.
Kodak shares ended down more than 9 percent at $27.55.
Among other brand names, S&P also cut Maytag Corp's debt ratings to junk, citing its challenges in restoring market share and profit margins.
Maytag bonds due 2015 with 5 percent coupon traded at 85 cents on the dollar to yield 7.11 percent, compared to the most recent prior quote from Tuesday at about 87 cents on the dollar, according to MarketAxess.
Maytag shares plunged nearly 28 percent to $10.89.
In the ailing auto sector, Moody's Investors Service cut Visteon Corp deeper into junk and warned it may cut again, citing delays in reaching a restructuring agreement with Ford Motor Co and a decrease in business volume.
Visteon bonds due 2014 with a 7 percent coupon fell to 73.94 cents on the dollar, yielding 11.82 percent, from 78 cents the prior session, according to MarketAxess.
Elsewhere in the junk market, Calpine Corp took a wild ride on market speculation that the independent power producer was planning to file for bankruptcy.
Calpine said it is in compliance with all of its indentures and has no plans to file for bankruptcy protection.
Bonds issued by Calpine's Calpine Canada Energy Finance due 2008 with a 8.5 percent coupon were most active, ending at 59.13 cents on the dollar after trading as low as 53 cents, down from 61.06 cents on Thursday, according to MarketAxess.