September 2, 2010
As stocks extended gains for a second day and Treasuries fell, corporate bonds continued to outperform government bonds as spreads tightened. The short index gained while the long fell, appearing as if investors stayed near the exit as they await tomorrow’s data release and gear up for the long weekend.
iTB 1-5 Year High Grade Corporate Bond Index
The shorter-maturity iTB index inched up by 0.1% to 1080.98 as investors preferred shorter maturity corporate bonds over those far out in the spectrum. Average yields fell 3 bp to 2.66%, as spreads tightened 4 bp to 1.83% as corporate bonds outperformed Treasuries.
Extending its gains for a third day in a row, the most for any bond in the iTB index, was Transocean’s 5.25% bond maturing in March 2013. The bond rallied 56 cents to end at 103.31, pushing yields 23 bp lower to 3.86. The spread for the BBB rated bond tightened 23 bp to 3.26%. Oil companies continued to perform well after the Oil Service Sector Index gained, and as talks of Transocean being acquired are making the rounds. The rally might end by tomorrow after an explosion on Mariner Energy oil rig caused crude prices to rise.
The laggard for a second day in a row was Rio Tinto’s 5.875% bonds maturing July 2013. The bonds slid 10 cents down to 111.26, pushing yields 3 bp higher to 1.83%. Spreads widened 3 bp to 1.12%.
iTB 5+ Year High Grade Corporate Bond Index
The longer index edged down slightly to 1136.01 from 1136.72 yesterday. The index was as good as unchanged with average price of bonds falling 7 cents and average yield gaining a basis point to 4.13%. However, credit spreads tightened 4 bp to 1.78% as government bonds sold off more than corporate bonds.
The best performer of the day, continuing its gains from yesterday was Anadarko Petro’s 6.45%, September 2036 maturing bonds. The bond gained a whooping $3.01 today and was last traded at 90.05. The yield fell 29 bp to 7.31% and spreads tightened 37 bp to 3.94%. The bond was a clear outlier in a day when most bonds in this index dropped.
The loser of the day in this index was Wal-Mart’s 5.25%, September 2036 maturing bonds. The bond fell $1.68 to trade last at 106.36. Its yield rose by 11 bp to 4.81%, and spreads widened 4 bp to 1.29%.
Posted by Maulik on 