Most spreads on US corporate bonds were little changed on Friday, while Canadian drugstore Jean Coutu Group Inc's bonds rose in the high-yield market. Jean Coutu's bond price rose after sources said some retailers and private equity firms have take-over interest in the pharmacy chain's US Eckerd drugstores.
Jean Coutu's 8.5 percent note due 2014 rose to 93.125 cents on the dollar, from 91.625 cents on the dollar, according to MarketAxess. In the high-grade market, Sara Lee Corp notes were actively traded with mixed spreads a day after the company said it would be paid $2.4 billion by Hanesbrand Inc, the apparel business that Sara Lee is spinning off.
Sara Lee has said it would use the money to buy back Sara Lee shares, pay down debt, pay dividends to Sara Lee shareholders and invest in the company to drive growth. Standard & Poor's said the one-time payment will have no immediate impact on the company's debt rating or outlook. S&P currently rates Sara Lee's debt at "BBB-plus," the third lowest investment grade level.
Spreads on Sara Lee's 6.25 percent note due 2011 narrowed to 1.15 percentage point over US Treasuries, from 1.20 percentage point, according to MarketAxess. Sara Lee's 2.75 percent note due 2008 was 2 basis points wider at 0.80 percentage point over US Treasuries, according to MarketAxess.
In the auto sector, Ford Motor Co and its finance arm bonds strengthened a day after it reported lower than expected earnings. "Ford's second-quarter earnings were pretty dismal and without much of a silver lining aside from that that market had priced in a lot of negativity," Dan Ilany, an analyst at Bear Stearns in New York, wrote in a research note published on Friday. However, Tower Automotive Inc, a Ford supplier, announced a tentative agreement with its unions, which is a positive for Ford, Ilany said.
Ford's 7.45 percent bond due 2031 rose to 73 cents on the dollar from 71.75 cents on the dollar, according to MarketAxess. In the primary market, $4.7 billion of high-grade and high-yield debt was absorbed this week, according to data firm Dealogic. While the market absorbed less new debt than last week, companies have sold $405.3 billion so far this year, $72.2 billion more than last year, the data showed.