Prices of General Motors Acceptance Corp's bonds rose on Friday on heightened speculation about General Motors Corp selling the company to a higher rated entity.
"There is all kind of speculation about who is interested in buying, and the consensus is that it could happen very quickly too," said Mike Mutti, corporate bond strategist at Bear Stearns in New York.
General Motors Corp said earlier this week it is considering selling the controlling stake in GMAC in an effort to restore the finance unit's ratings.
GMAC's 8 percent bond due 2031 rose 5 cents on day, up to 109 cents on the dollar, according to MarketAxess. This is up nearly 23 cents from this year's low of 79 cents on April 15.
If a higher rated entity bought GMAC it would take a lot of fear and uncertainty out of the corporate bond market, said Brian Reynolds, chief market strategist at M.S. Howells & Co based in Scottsdale, Arizona.
Analysts have said it is likely a financial institution will be interested in purchasing a portion of GMAC.
A CreditSights report published on Wednesday said Bank of America is a candidate and other analysts said HSBC may be contemplating the purchase.
In an otherwise unchanged market, spreads on both Bank of America's and HSBC's most actively traded notes widened a touch. HSBC's 5 percent note due 2015 widened one basis point on the day to 91 basis points over Treasuries. Bank of America's 4.75 percent note due 2015 widened three basis points on the day to 73 basis points over Treasuries.
Whatever the outcome, the effects of the transaction will probably be isolated to the auto sector, Mutti said. Credit spreads of the purchasing company may widen, but their respective sector shouldn't because the GMAC sale appears to be a unique situation, he said.
The price of Dana Corp's 10.125 percent note due 2010, meanwhile, fell after Standard & Poor's cut its debt ratings deeper into junk status. Dana's automotive systems and commercial vehicles groups are inefficient and will take time to fix, S&P said in the ratings action release.
Dana's 10.125 percent note fell nearly a cent on the day to 93.25 cents on the dollar, according to MarketAxess.
In the new issue market, Wells Fargo sold $1.5 billion of debt, which was increased from an originally planned $500 million, joint lead manager Merrill Lynch said.