US high-grade corporate bonds were mostly unchanged on Friday, while in the high-yield area, airline bonds tumbled after J.P. Morgan Securities cut estimates for several airlines.
Average spreads on investment-grade bonds have held steady at about 93 basis points all week, with ongoing concerns about leveraged buyouts limiting the market's upside despite stronger-than-expected profits, according to strategists.
In the high-yield market, prices were unchanged, though the market is wrapping up the month with the strongest investment returns of any major type of US bond, about 1.23 percent for April to date, according to Merrill Lynch data.
In the new-issue market, new high-yield deals that priced on Thursday all performed well, especially an issue by Outback Steakhouse owner OSI Restaurant Partners, which rose 3 points after its sale, said Justin Monteith, market analyst at KDP Investment Advisors in Montpelier, Vermont.
"There's still a large segment of the market that has an outlook on the economy that we're not going to have too much inflation or too much weakness," Monteith said.
Despite a report on Friday showing weaker-than-expected first-quarter gross domestic product growth, the consumer is holding up well, he said. "That's maybe one area where people were a little worried - is the consumer going to get choked by the housing market?" Monteith said. "Even though there was some definite weakness in other elements that make up GDP, the consumer demand element of it remains strong."
The Commerce Department said GDP grew by 1.3 percent in the first quarter, below the 1.8 percent that Wall Street analysts had forecast. But consumers increased spending by 3.8 percent, down only modestly from 4.2 percent in the fourth quarter.
Airline bonds fell sharply after J.P. Morgan analyst Jamie Baker said in a research note that domestic airline revenue "is neither up to snuff nor likely to improve." Delta Air Line's 7.9 percent bonds due in 2009 plunged to 54 cents on the dollar on Friday, down from 58.5 cents on Thursday, according to MarketAxess.
Ford Motor Co's bonds gave back some of Thursday's gains after the company's chief sales analyst said US auto industry sales in April were "terrible" as a slow housing market and rising gasoline prices hurt consumer confidence.
Ford's 7.45 percent notes due in 2031 fell to 79.75 cents on the dollar, down from 80 cents a day earlier, according to MarketAxess. They had risen more than 1 cent on Thursday after the automaker posted a narrower-than-expected first-quarter loss. In the government market, benchmark 10-year Treasuries were unchanged, yielding 4.7 percent.