US corporate bond spreads ended mixed on Friday, capping a week of gains, after a weak jobs report fuelled speculation growth is slowing and bolstered hopes Federal Reserve rate hikes may end sooner than previously thought. Prospects of fewer rate hikes helped fuel Friday's gains in the junk bond market, whose issuers are particularly vulnerable to tighter monetary policy, a portfolio manager in Los Angeles said. Auto bonds, which tend to lead the broader market, ended mixed after rising the prior few sessions.
Benchmark Treasuries, which initially rallied on the jobs data and later fell, also failed to give high-grade portfolio managers a good reason to either buy or sell, market participants said.
With Treasury yields trending downward lately and high-grade spreads tightening, corporate bonds may not have much more upside, said Brad Eppard, portfolio manager at BB&T Corp in Winston-Salem, North Carolina.
Shareholder-enriching moves are on the rise, which is further reason to be cautious with corporate bonds, Eppard added. "That is the biggest reason why we are shying away from Corporates."
Bonds issued by Ford Motor Co were most actively traded in the high-grade market on Friday. Late in the session, spreads on Ford bonds due 2031 with a 7.45 percent coupon were 0.02 percentage point tighter at 4.38 percentage points over comparable Treasuries to yield 8.67 percent, according to MarketAxess.
Bonds issued by General Motors Corp, which investors said smoothly transferred to the junk market this week, were also mixed.
GM's most-traded debt were bonds issued by General Motors Acceptance Corp due 2031 with an 8 percent coupon. Late in the session, the bonds traded at 88 cents on the dollar to yield 9.22 percent, down from 88.44 cents on the dollar late Thursday, according to MarketAxess.
In other markets, Treasuries prices fell heavily in a full technical retreat after solid data on the services sector for May put the brakes on buying stirred earlier by the payrolls report.
In late trading, 10-year Treasury notes were quoted down 19/32 to yield 3.98 percent.
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