Ford bonds hit by S&M downgrade
by Brian Turner
Standard & Poor’s downgraded the credit ratings of Ford and General Motors on Thursday.
This move came before expected and sent the price of the two carmakers’ bonds strongly lower in Europe and the United States.
It also spurred small gains in shorter-dated government bonds as investors looked to them for less risk.
Then, on Friday, news of a stronger than expected employment report in the U.S. sent Treasury bond prices down and yields up.
Early Friday 2-year U.S. government bonds saw their yields rise by 15 basis points to 3.68 percent. 30-year bond yields were 5 basis points higher at 4.63 percent.
In the corporate bond market, reaction to the downgrade of GM and Ford was also mild because while the move came earlier than expected, the market knew it was coming at some point.
Early Friday the high-yield market was trading at yields of about 413 basis points higher than Treasury bonds, about the same level as it held on Wednesday, before news of the downgrades broke.
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