US corporate bond yield spreads were mostly unchanged on Friday, although traders reported better buying than earlier in the week as a positive session in equities lifted sentiment.
For the week, corporate bond yield spreads over Treasuries were unchanged to about 0.01 percentage point wider, strategists said, after persistent jitters over rising interest rates offset generally positive first-quarter earnings reports.
A rise in benchmark Treasury yields drove corporate borrowing costs higher for the week, putting a lid on corporate bond issuance.
"Earnings season is keeping companies on the sidelines, but the other factor is a sharp rise in interest rates over the past two to three weeks," said William Cunningham, head of credit strategy at FTN Financial.
"New issuance for the next couple of months, unless rates drop precipitously again, is going to be quite subdued."
Companies sold just $6.5 billion in high-grade bonds this week, leaving month-to-date issuance at just $13.3 billion, according to Thomson Financial. By comparison, the first two weeks of March saw about $26.2 billion of issuance, and sales for the full month came to nearly $90 billion.
"The strong issuance we saw in March was nearly entirely due to a dramatic drop in interest rates that created a lot of opportunistic issuance, primarily on the financial side," said Cunningham.
Average yields on corporate bonds have risen to about 4.6 percent from 3.9 percent in mid-March, according to Merrill Lynch & Co.
Corporate bonds are likely to take their direction next week from earnings reports and Federal Reserve Chairman Alan Greenspan's comments to Congress on the economy on Wednesday, strategists said.
Investors will scour Greenspan's testimony to the Joint Economic Committee for any signals that a period of ultra-low interest rates is about to end.
In other markets, benchmark 10-year Treasuries rose 14/32 and their yields fell to 4.35 percent as declines in industrial output and consumer confidence helped offset fears of an imminent interest rate hike.
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