US high-grade corporate bond spreads were unchanged to slightly wider on Friday as Tracinda Corp's decision not to buy additional shares of General Motors Corp captured the market's attention, while high-yield bonds were flat to slightly higher.
Tracinda Corp, the investment firm representing billionaire investor Kirk Kerkorian, said in a regulatory filing on Friday it has decided not to acquire additional shares of GM's common stock. Tracinda also said that Kerkorian adviser Jerome York had resigned from the GM board.
Trading activity of GM's 8.375 percent bond due 2033 jumped on the Tracinda news, but the reaction was muted, with the issue now trading at 87.50 cents on the dollar, close to its opening level of 87.56 cents, according to MarketAxess.
High-grade spreads narrowed most of this week, partly because of increasing confidence in the possibility of a "soft landing" in the economy, said Scott MacDonald, co-director of research at Aladdin Capital in Stamford, Connecticut.
Spreads widened as much as 1 or 2 basis points on Friday partly because of limited activity given the upcoming holiday, MacDonald said. The bond market closes at 2 pm on Friday, and will be closed on Monday for the Columbus Day holiday.
The high-yield market, meanwhile, was "mostly firm and quiet," said KDP Investment Advisors in a note. Hybrid securities, which combine features of debt and equity, enjoyed a second straight day of narrower spreads in the secondary market, MacDonald said.
Such securities tightened 1 to 2 basis points on Friday, he said. Buyers are hoping to gobble up hybrids before an expected influx of supply arrives and widens spreads.
"There was a big expectation that in the first week of October you'd see a lot of new issues out of the box, and that hasn't happened," MacDonald said. "The question now is, as you go toward the elections, and if the Democrats win, does that provide a hiccup for the market and make investors a little more cautious," he said.
Jim Merli, global head of debt syndicate at Lehman Brothers, said investors "feel like they're getting incremental spread in a marketplace that's otherwise fairly spread compressed."
"If you're getting an incremental 50, 60, 70 basis points for subordination, that's a more attractive trade, to go down in the capital structure in a credit that you're comfortable with, as opposed to buying a lower quality credit to get that extra spread," he said.