The US corporate bond market was firmer on Friday, in line with a stronger stock market, after government data showed stronger-than-expected jobs growth last month. The US economy added a stronger-than-forecast 132,000 jobs in November, the government reported on Friday, though the unemployment rate edged up slightly from October.
Corporate credit spreads are largely following the direction of the stock market, said Ira Jersey, US credit strategist at Credit Suisse in New York. The Dow Jones industrial average was up 29.08 points, or 0.24 percent, to end unofficially at 12,307.49 while the Standard & Poor's 500 Index rose 2.55 points, or 0.18 percent, to finish unofficially at 1,409.84.
"We are seeing some strength in the bond side as underweight people position going into year end," Jersey said. Bond spreads are being supported as some investors who are underweight corporate debt are raising their exposure to generate more carry heading into the new year, he said.
The benchmark investment-grade credit derivatives index ended Friday unchanged at 34.25 basis points, after ending weaker on Thursday, led by weakness in companies active in subprime mortgage lending. The bonds of Countrywide Financial Corp's, the largest mortgage lender, were weaker following news of fresh troubles in the subprime mortgage lending business.
Ownit Mortgage Solutions, a subprime mortgage lender, ceased making new loans on Tuesday, according to people familiar with the matter. The industry is suffering from rising defaults. Countrywide Financial's 5.609 percent floating-rate bond due 2009 fell to 100.17 cents on the dollar on Friday from 100.19 cents on Monday, its last recorded trade, according to MarketAxess.
Spreads of Residential Capital Corp, the mortgage arm of General Motors Corp's finance unit, 6 percent bond due 2011 widened by 5 basis points to 1.30 percentage points over Treasuries. Bonds of Delta Air Lines Inc, meanwhile, gained after court filings confirmed that a group of nine unsecured creditors of the bankrupt carrier have formed an unofficial committee to represent their interests. Delta's 8.3 percent bond due 2029 rose 2.5 cents to 66 cents on the dollar, according to MarketAxess.