By Dena Aubin
NEW YORK, Sept 17 (Reuters) - U.S. corporate bond yield spreads tightened on Wednesday, a day after Ford Motor's first unsecured U.S. bond sale in 18 months drew robust demand from yield-seeking investors.
Ford's bond issue, sold by its financing arm Ford Motor Credit Co., tightened by about 0.15 percentage point early on Wednesday, a sign of strong investor appetite.
A growing view that the Federal Reserve will leave interest rates low long enough to spark healthy economic growth may have helped stoke demand for the Ford deal, said Brian Cothran, corporate bond trader at Mellon Financial Markets.
"If the economy is good, people are going to be buying autos," Cothran said.
Investors also were drawn to the deal by some of the highest yields in the investment-grade market, strategists said.
A five-year portion, priced at a spread of 2.60 percentage points more than Treasuries on Tuesday, was bid at 2.45 percentage points more than Treasuries and offered at 2.43 percentage points on Wednesday, traders said.
A 10-year tranche, priced at 2.80 percentage points more than Treasuries, was bid at a spread of 2.68 percentage points and offered at 2.65 percentage points, traders said.
In the broader corporate bond market, spreads over Treasuries tightened by about 0.01 to 0.02 percentage point overall, traders said.
Spreads narrowed sharply on Altria Group's bonds after its cigarette unit, Philip Morris, won a key court victory.
The Illinois Supreme Court on Tuesday cut almost in half a $12 billion bond that Philip Morris must post to appeal a key verdict, sparing Altria a potential cash crunch. Altria's 7.75 percent bonds due in 2027 traded at 2.40 percentage points more than Treasuries, about 0.20 percentage point tighter on the day, according to MarketAxess.
In other markets, benchmark Treasury 10-year notes rose 8/32, yielding 4.249 percent, as the Federal Reserve's commitment to low interest rates boosted sentiment. The Fed on Tuesday left its key federal funds rate unchanged at a 45-year low of 1 percent and reiterated that the rate will stay low for a "considerable" time to spur economic growth.
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