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LONDON, July 24 (Reuters) - Bonds of German automaker DaimlerChrysler rose in value on Thursday, and the cost of buying protection against default fell, after the firm posted a larger than expected second quarter operating profit.
DaimlerChrysler's operating profit slumped 62 percent to 641 million euros ($736 million), hit by a deep loss at its U.S. Chrysler arm, but was way above a Reuters poll of 30 analysts estimating a profit of 288 million euros.
The yield on DaimlerChrysler's seven percent euro bond due March 2011 fell by seven basis points to 132 basis points over government debt, dealers said. Yields fall as prices rise.
Five-year DaimlerChrysler credit default swaps (CDS) were trading at around 125 basis points, three basis points lower on the day, a trader said. The prices mean that it costs 125,000 euros a year to insure 10 million euros of DaimlerChrysler debt against default for five years.
Dealers said the tone across the auto sector in the CDS and bond markets was positive.
General Motors Corp. five-year CDS were quoted at around 250 basis points and Ford Motor Co. at around 277 basis points. Both contracts were around five basis points tighter on the day, said a trader.
Further moves in credit could come after the company holds a conference call, said the trader: "But for the moment it's positive, and spreads are three to five basis points better."
DaimlerChrysler, which issued a shock profit warning last month, said it still aimed to post an operating profit of about five billion euros for the full year.