US corporate bond spreads widened on Friday as investors turned away from riskier assets amid worries over sovereign debt problems in Europe and after US jobs data pointed to a slow economic recovery. The costs to insure corporate bonds against the risk of default also rose on Friday. The main index of US investment grade credit default swaps widened by about 2 basis points to about 102 basis points, according to Markit Intraday.
"(Corporate debt) is definitely getting weaker, spreads have widened," with pressure from weakness in the stock market through much of the day, said Bob Gorham, managing director and head of investment-grade bond trading at Broadpoint Capital in New York.

US non-farm payrolls data on Friday presented a bit of a mixed message for the market, but overall most investors took it as pointing to economic recovery that was less robust than originally hoped. While US payrolls fell by an unexpected 20,000 jobs in January, the unemployment rate surprisingly dropped to 9.7 percent during the month. However, the amount of jobs lost in December was revised sharply higher.
"There was a lot of head scratching over the (payrolls) number. I don't think anyone was believing the 9.7 number and the revisions in December were substantial, so it really wasn't a good report," Gorham said. Investors have also been fretting this week over a possible default by Greece and other debt-laden European nations.
After a robust year-long rally, corporate bonds pared some gains in January as investors began to fret that the US economic recovery might lose momentum. Investment-grade yield spreads had widened to 185 basis points as of Thursday, the widest in a month and out from 176 basis points in mid-January. However, those spreads are still well in from record wides above 650 basis points in December 2008.
Kraft Foods Inc, on Thursday sold $9.5 billion of debt, with spreads on that debt tightening by a few basis points on Friday, while spreads on $8.0 billion of debt from Warren Buffett's Berkshire Hathaway Inc, also launched on Thursday, widened by a couple of basis points on Friday in tandem with much of the rest of the market, Gorham said.
Despite the sharp tightening last year, some investors still see more value in corporate debt. "Our view is that the credit strength of corporate bonds may actually be better than for some sovereign bonds. The balance sheets of some corporate bond (issuers) are very strong on the whole," said Ron Weiner, president and founder of RDM Financial Group in Westport, Connecticut. "The recession was more in employment than in profits - at the shorter end of the curve, (investment grade) corporate bonds are extremely attractive as a holding position," Weiner said.