Spreads on US high-grade corporate bonds were mostly unchanged on Friday amid low trading volumes while new bond sales fell as market players took their August vacations.
In the secondary market, Owens Corning's bonds rose after a federal appeals court reversed a lower court ruling to treat the company and its units as a whole in bankruptcy.
Most bondholders had viewed Owens Corning's plan of reorganisation as unfavourable to them because it gave too much money to asbestos litigants, said Ron Bringewatt, managing director and head of research at Seaport Group.
"This court ruling will negate that plan. The hope is from the bondholder group that now a more favourable plan may be put together.
Bondholders are also hoping that the court ruling will delay Owens Corning's emergence from bankruptcy until asbestos reform legislation is approved by Congress, Bringewatt said. That legislation would set up a trust to pay asbestos claims, removing them from the balance sheet of Owens Corning, he said.
Owens Corning's 7.5 percent bonds due in 2018 reached a yearly high of 88.25 cents on the dollar on Friday, about half a cent higher on the day, according to MarketAxess.
On the week, those bonds are up 5-1/2 cents.
Meanwhile, Northwest Airlines' bonds fell, reversing gains from Thursday, as the airline made what it called its "last, best offer" to its mechanics union ahead of a looming strike deadline.
The mechanics are expected to reject the latest proposal and could walk off the job as early as midnight Friday. Northwest is seeking $176 million in savings from the mechanics as part of a larger savings effort to avert a bankruptcy.
Northwest's 8.875 percent notes due in 2006 fell to 62 cents on the dollar, more than 2 cents lower from Thursday, according to MarketAxess.
Delphi's bonds have risen by about six points from their lows earlier this month as analysts have grown more confident that the company will receive help from its former parent, General Motors Corp, and cost concessions from its union to stay out of bankruptcy.
"Delphi has many reasons to file. However, GM doesn't want to see them file and neither does the union, so they (Delphi) should get some good concessions," said Mirko Mikelic, portfolio manager at Fifth Third Asset Management.
Analysts have speculated that GM will be willing to shoulder more health care and pension costs for Delphi, its largest supplier, to avoid disruptions to upcoming product launches.
Delphi's 6.55 percent bonds due in 2006 rose to 93.5 cents on the dollar, 1 cent higher on the day, according to MarketAxess.