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Intl-Bonds-European corporate bonds slip on supply

LONDON, Sept 23 (Reuters) - European corporate bonds opened slightly weaker on Tuesday as the market digested 2.5 billion euros of new bonds from U.S. auto maker General Motors which weighed on auto sector paper.

The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 69.8 basis points more than similarly dated government bonds at 8:51 GMT, 1.0 basis point higher on the day.

"We are seeing some natural profit taking but nothing dramatic. It was triggered by some opportunistic supply in the auto sector," said a trader in London.

"Overall the market is well positioned but the risk is in the foreign exchange markets and other external factors."

Major currencies were pinned to narrow ranges on Tuesday, with bullishness on the yen checked as Japan's top financial diplomat Zembei Mizoguchi, attending IMF meetings in Dubai, signalled the government was ready to intervene in the currency markets to stem the yen's recent gains.

General Motors Acceptance Corp (GMAC), the financing arm of General Motors , late on Monday sold 2.5 billion euros of three- and seven-year bonds, lead managers for the deal said.

The sale comprised 1.5 billion euros of 4.375 percent bonds maturing in September 2006, and 1.0 billion euros of 5.75 percent bonds due September 2010.

The three year bonds were priced to yield 175.5 basis points more than benchmark European government debt, or 160 basis points over swaps, while the seven-year bonds paid 207.3 basis points over Bunds, or 195 basis points over swaps.

Elsewhere, bonds of French engineering company Alstom weakened slightly early on Tuesday as investors digested a new rescue plan but remained cautious about the firm's future.

Traders said Alstom's 2004 euro bond was little changed at 96.5 percent of face value, having gained around 11 points on Monday, but the 2006 bond was bid around two points lower at 82 percent of face value.

"There's been some profit taking and with the 2006 bond people are looking at the guidance and that still seems pretty weak," said one trader.

MOODY'S CHANGES FRANCE TEL OUTLOOK TO POSITIVE

Moody's Investors Service late on Monday changed its outlook on France Telecom and its Orange mobile operator affiliate to positive from stable, saying France Telecom is making significant steps to reduce its debt burden.

Moody's currently rates France Telecom's and Orange's long-term debt Baa3, its lowest investment grade.

Further debt reduction is likely, thanks to additional asset sales as well as improved cash flow, cost reduction and restructuring, Moody's said.

Elsewhere, Cadbury Schweppes Plc sold $2 billion of two-part notes in a private placement, in a deal that was upped from $1.5 billion.

Cadbury Schweppes sold $1 billion of 3.875 percent notes maturing in October 2008 at a spread of 80 basis points over U.S. Treasuries, and $1 billion of 5.125 percent notes due in October 2013, priced to yield 5.2 percent, or 95 basis points more than Treasuries.

In underlying government bond markets the yield on the interest rate sensitive two-year Schatz was 2.33 percent, 2 basis points less, while the 10-year Bund was yielding 4.10 percent, little changed on the day.

The 10-year euro swap rate was 4.21 percent.