LONDON, Oct 17 (Reuters) - European corporate bonds rose on Friday, with autos and insurance extending recent gains as investors bet on faster growth, while Telecom Italia announced $2 billion of new borrowing.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 65.4 basis points more than similarly dated government bonds at around 1508 GMT, one basis point less on the day.
Insurance bonds gained as Germany's Munich Re , the world's largest reinsurer, said it expected to raise 3.8 billion euros in a rights issue.
The company's 6.75 percent bond due 2023 was bid at 123 basis points over Bunds around 14:40 GMT, a trader said, 11 basis points lower on the day. It earlier traded as low as 118 basis points over Bunds.
"Spreads tightened in a big way early on, but the move fizzled out later," said one trader. "We saw a lot of performance in the past few weeks, and the rights issue was quite well flagged, so it was never going to go that much tighter."
Munich Re said it would offer its shareholders two new shares for every seven shares they hold, at a price of at least 75 euros per share.
In the auto sector, the recent pattern of spread tightening showed no sign of abating.
Spreads on bonds of both Ford Motor Co. and General Motors Corp. were about eight basis points tighter late on Friday, after earlier moving to around 15 basis points tighter, a trader said.
"We saw some real money coming into the market earlier, but there was some selling this afternoon," he added.
Dutch retailer Ahold was an exception to the bullish trend, with its bonds falling after the company issued a warning on its 2003 earnings as it reported a 4.33 billion euro 2002 net loss under U.S. GAAP accounting rules after heavy goodwill charges.
Ahold's 5.875 percent 2012 euro-denominated bond was bid at 96 percent of face value around 1455 GMT, a trader said, around 0.5 percentage points lower on the day. It earlier fell as much as 1.5 percentage points.
Ahold said 2003 results will be hit by auditor fees and refinancing costs after a bookkeeping scandal in February.
TELECOM ITALIA PLANS TO SELL DOLLAR-BOND
Telecom Italia plans to sell $2 billion of bonds following roadshows next week, a banker involved with the deal said on Friday.
The deal will be split between five- and 10-year tranches, with a possible 30-year part, the banker said. Citibank, JP Morgan and Lehman Brothers are managing the sale.
The bond is rated Baa2 by Moody's Investors Service and BBB+ by Standard & Poor's. Pricing is expected next week, the banker said.
Elsewhere, Dutch brewer Heineken NV plans to sell at least one billion euros of bonds to help finance its purchase of Austrian brewer BBAG, said a source familiar with the deal early on Friday.
The sale will be split into two tranches, one maturing in January 2010 and another maturing in November 2013. Price talk for the seven-year paper indicates a yield of 50-55 basis points over swaps, while the 10-year bond will come at 70-75 basis points over swaps, the source said.
The sale is Heineken's first euro-denominated bond. The bond is unrated. The company said during a conference call this week that it does not in the near future plan further major acquisitions that might require bond issuance.
Barclays Capital , Citigroup , Credit Suisse First Boston and JP Morgan have been mandated to lead the deal.
Roadshows for the deal have been taking place in Europe this week.