September 3, 2010
Corporate bonds continued to slide on improved economic data easing concerns about the economy. Stocks gained and government bonds ended in the red, pushing yields higher. As a result, spreads tightened for corporate bonds, essentially reducing the extra yield demanded by investors to hold riskier corporate debt rather than government bonds.
iTB 1-5 Year High Grade Corporate Bond Index
The shorter-maturity iTB shed its gains from yesterday, shedding 0.1% to 1079.87. Average yield gained 3 bp to 2.69%, but owing to the grater fall of Treasuries, spreads to the benchmark government bonds tightened 2 bp to 1.82%.
The bond that resisted the fall of the index the most was General Electric’s 5.00%, February 2013 maturing bonds, which gained 15 cents in price to trade last at 108.35. The yield of the bond closed at 1.46%, 6 bp lower than yesterday. Spreads tightened 10 bp to 84 bp or 0.84%. Bond prices move inversely with yields.
The bond leading the downward rally was Transocean’s 5.25% bond maturing in March 2013, which was the best performer for three days before falling. The yield on the bond climbed 8 bp to 3.95% as its price fell 20 cents to 103.11. Spreads widened 4 bp to 3.30%.
iTB 5+ Year High Grade Corporate Bond Index
The longer index continued to fall, shedding 0.2% to 1133.42%. As a result, average yields pushed 4 bp higher to 4.17%. Treasuries sold off more than corporate bonds, resulting in a narrowing of spread by 4 bp to 1.74%.
The leader of the day was ArcelorMittal’s 9.85%, June 2019 maturing bonds. The bonds gained 41 cents in price to 125.08, pushing yields 5 bp lower to 6.01%. Spreads narrowed 13 bp to 3.65%.
The worst performer of the day was Dow Chemical’s 8.55%, May 2019 maturing bonds. The bond shed 64 cents to 124.19, pushing yields 8 bp higher to 5.07%. Spreads remained flat at 2.68%.
The week ended with corporate bonds lower but spreads tighter as company issued debt outperformed government debt on eased concerns about the economic recovery.
Posted by Maulik on 