By Nancy Leinfuss
NEW YORK, Nov 25 (Reuters) - U.S. corporate bond yield margins closed at tighter levels on Tuesday amid light trading while a $1 billion global debt sale from General Electric's finance unit shook up a quiet primary market, traders said.
"The market has been pretty quiet but there's a better tone out there and spreads have come in," said one trader.
Spreads, the additional yield corporate bonds pay over Treasuries, closed about 0.01 to 0.02 percentage point tighter on Tuesday, although trading levels were extremely quiet ahead of the Thanksgiving Day holiday. Yield spreads on more volatile auto issues were quoted 0.05 percentage point tighter on the day, traders said.
In the primary market, General Electric Capital Corp. sold $1 billion of seven-year global notes at a yield spread of 0.7 percentage point over Treasuries. Initially, the deal had been pegged at a $750 million size but market players said the offering was boosted to accommodate demand.
"The deal went very well and was priced in an attractive part of the curve," said one dealer.
The issue is rated "Aaa" by Moody's Investors Service and "AAA" by Standard & Poor's. GECC also plans to issue a 750 million euro-denominated three-year note offering, as well.
GE's 5.45 percent bonds due 2013 were recently trading at 0.65 percentage point over Treasuries, about 0.01 percentage point wider, according to MarketAxess.
General Electric recently said it expects to return to double-digit profit growth in 2005 after flat-to-modest growth next year, as it splits off insurance assets to focus on faster-growing healthcare technology and entertainment media.
Washington Mutual Inc.'s bonds received a boost after news that its finance unit would be acquired by Citigroup Inc.. Citigroup, the No. 1 U.S. financial services company said on Monday that it agreed to buy Washington Mutual's consumer finance unit for $1.25 billion.
Washington Mutual Finance Corp.'s 6.875 percent paper due 2011 tightened by as much as 0.10 to 0.15 percentage point over Treasuries on the initial news, traders said.
Following the news of the acquisition, Fitch Ratings placed Washington Mutual Finance Corp.'s short- and long-term ratings on rating watch positive. Fitch currently gives the company an 'A' long-term rating.
In other markets, 10-year benchmark notes rose 11/32 to yield 4.189 percent while the Dow Jones industrial average gained 30 points at 9,777, in late Tuesday trade.
To see upcoming and recent corporate bond sales, click on [nNEUBD4].