Corporate bonds pare declines

European corporate bond spreads pared declines late on Thursday as investors waited to assess the likely impact of Hurricane Rita on the oil-producing southern United States.
Insurers were among the biggest decliners, as their bonds widened as much as four basis points, amid concern over the extent of the potential damage.
"Sentiment is not great but we have come in from the wides," said a trader in London. "People want to wait and see."
Oil raced towards $68 a barrel as Hurricane Rita bore down on the Gulf of Mexico on Thursday and threatened to batter oil and gas infrastructure that is struggling to recover from the earlier Hurricane Katrina. The iTraxx Crossover index of credit default swaps rated both investment grade and high yield traded 3 basis points wider at 1435 GMT, bid at 313 basis points, the trader said, after earlier widening by as much as seven basis points.
Bonds of reinsurers Hannover Re, Munich Re and Zurich Financial Services traded three or four basis points wider, according to Societe Generale. In the past three weeks bonds of the world's largest reinsurers have widened by up to 21 basis points as investors shunned the credits after Hurricane Katrina hit the south coast of the US. "With two months of a very active hurricane season, to go long here may only be for the brave," Societe Generale analyst Suki Mann said.
Standard Life, Europe's biggest mutual life insurer, has been the biggest beneficiary of trades out of the reinsurance sector, seeing its bonds tighten around 10 basis points in the past three weeks.
Elsewhere, bonds of major automakers rallied as investors awaited further news on General Motors' long-running dispute with auto-parts provider Delphi.
General Motors' 8.375 percent euro bond due in July 2033 traded around half a point better bid at 79 percent of face value, a trader said, stemming recent declines.
Delphi said on Wednesday said it had not drawn the remainder of a $1.8 billion credit line, shooting down market rumours that it had tapped that source of liquidity completely.
Delphi has said it would consider bankruptcy for its US operations if GM and the United Auto Workers union do not help it cut high wage and benefit costs in North America.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 37.5 basis points more than similarly dated government bonds at 1510 GMT, 0.4 basis points more on the day.
French auto parts maker Faurecia plans to price a 300 million euro 5-year bond later on Thursday to yield around 5 basis points more than initially expected, a banker familiar with the sale said.