The cost of default protection on Ford and its financing arm fell on Tuesday as investors kept a positive view on the US automaker and its new management a day after it posted its largest quarterly loss in 14 years.
Five-year credit default swaps on Ford traded 20 basis points tighter at 625 basis points, while Ford Motor Credit Co (FMCC) was as much as 15 basis points tighter at 355 basis points, said a trader. Ford shares were up 2.5 percent.
"It's hard to explain, but I guess they like the new guy," the trader said, referring to Ford Chief Executive Alan Mulally, who took over in early September. "Otherwise it has been busy but without any standout movers."
Ford debt and default protection was hit on Monday after the No 2 US automaker posted a quarterly loss of $5.8 billion, and Standard & Poor's and Fitch Ratings also said they might cut Ford's unsecured debt ratings deeper into speculative grade if the automaker acts on plans to issue secured debt.
Additional secured debt would disadvantage holders of the automaker's unsecured bonds.
Ford disappointed some investors by reiterating in a call to investors that it had no plans to sell its finance arm.
General Motors is expected to publish its earnings on Wednesday, with investors holding their nerve ahead of the announcement. Five-year protection on financing arm GMAC held steady at 150 basis points, while GM tightened slightly to 480 basis points, said a trader.
Standard & Poor's earlier this month kept General Motors Corp's ratings on watch for a possible cut after negotiations on an alliance with Nissan Motor Co and Renault broke down.
BNP Paribas analysts said on Tuesday the world's largest automaker may break even on global auto operations. Among European car companies, Volvo was little changed after a smaller-than-expected drop in quarterly pretax profit on Tuesday. Five-year protection traded at 30.5 basis points, said a trader.
The Sweden-based firm, the world's No 2 truck maker, said third-quarter pretax earnings fell to 3.14 billion crowns ($428 million) from 4.02 billion a year ago, but the figure topped the mean forecast of 2.96 billion in a Reuters poll of 17 analysts.
Earnings were hit by a 1.7 billion crown writedown of goodwill, which was included in analysts' estimates. The iTraxx Crossover index was 1.0 basis point wider on the day at 257 basis points bid, said another trader.
In the cash bond market, the FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 52.1 basis points more than similarly-dated government bonds at 1430 GMT, 0.3 basis point more on the day. On Wednesday, the focus will be on a Federal Reserve interest rate decision, with most investors convinced the central bank will leave borrowing costs unchanged at 5.25 percent for the third straight meeting.