US corporate bond spreads were steady but with a firm tone on Friday as cash continues to pour in to the asset class while investors were content to sit on this week's gains. In the cash market, spreads were generally unchanged but tighter by 1 to 2 basis points in pockets such as the financial sector, said Arnold Espe, vice president of fixed income research at financial services company USAA in San Antonio, Texas.
Overall, investment-grade cash spreads have tightened 6 basis points this week to 247 basis points over comparable US Treasuries through Thursday while high-yield spreads tightened 17 basis points to 893 basis points over US Treasuries, according to Merrill Lynch data.
The main index of investment-grade credit default swaps was steady at about 110 basis points on Thursday, according to data from Markit Intraday. The index tightened by as much as 2 basis points earlier in the session but drifted back to unchanged through the afternoon hours.
The positive tone in the cash-rich corporate bond market was unfazed by a slight give-back in equities, which broke a five-day firming streak due to declining crude oil prices. Corporate bonds are "once again very well bid for stuff is tightening and it seems there's no end in sight to the amount of money that gets put to work in this market," said Bob Gorham, managing director and head of investment-grade bond trading at Broadpoint Capital in New York.
In the primary market, Kinder Morgan Energy Partners launched a $1 billion two-part bond deal consisting of a $400 million 11.5 year tranche expected to yield 250 basis points over comparable US Treasuries and a $600 million 30-year tranche expected to yield 240 basis points over Treasuries, said IFR a Thomson Reuters service. In new high-yield debt sales, Global Crossing Ltd on Friday sold $750 million of senior secured notes, IFR said.
The Bermuda-based global communications solutions provider priced $750 million of six-year bonds at 97.944 cents on the dollar with a 12 percent coupon to yield 12.5 percent, said IFR. Demand for the sale was high enough that the company increase the size from an original offer of $650 million, a trader said.