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US Corp Bonds - Spreads firm as supply builds

By Dena Aubin

NEW YORK, Nov 18 (Reuters) - U.S. corporate bond yield spreads were unchanged to slightly tighter on Tuesday, while investors turned their attention to more than $16 billion of new issues on the calendar this week.

Low borrowing costs and fears that interest rates could rise next year have companies tapping the market at a brisk pace. This week is also viewed as one of the last windows of opportunity before demand begins tapering off as investors look to protect this year's gains, strategists said.

"Investors don't want to put year-to-date performance at risk between now and year-end," said William Cunningham, head of credit strategy at FTN Financial. That could keep demand subdued until January, when it is likely to pick up again, he said.

In the secondary market, corporate bond yield spreads over U.S. Treasuries were unchanged to about 0.01 percentage point tighter overall, traders said, while some auto bonds tightened by about 0.08 percentage point.

Spreads on Ford Motor Credit Co.'s newly issued 10-year notes tightened to 2.51 percentage points more than Treasuries on Tuesday after being sold at a yield spread of 2.57 percentage points over Treasuries on Monday, according to MarketAxess. Ford kicked off the week's supply surge on Monday by adding $1 billion to those 7 percent notes due 2013.

Low borrowing costs are attracting issuers to the market. Yields on the average corporate bond fell to just 1 percentage point more than Treasuries on Monday, the lowest yield spread of the year and down from 1.8 percentage points more than Treasuries at the beginning of the year, according to Merrill Lynch & Co.

Issuers in the market on Tuesday included Credit Suisse First Boston USA, a unit of New York-based investment bank Credit Suisse First Boston Corp., and consumer products company Procter & Gamble Co..

In the high-yield sector, Poster Financial Group Inc., a Las Vegas, Nevada-based private investment firm, sold $155 million of notes to help fund the acquisition of Golden Nugget casinos from MGM Mirage .

In other markets, benchmark 10-year Treasury notes rose 15/32, yielding 4.141 percent after the government reported that the U.S. consumer price index was unchanged in October, assuring investors that inflation remains under control.

To see upcoming and recent corporate bond sales, click on [nNEUBD4].