By Dena Aubin
NEW YORK, Jan 20 (Reuters) - U.S. corporate bond spreads were mostly unchanged on Tuesday, but yield spreads on General Motors Corp. and Citigroup bonds tightened after the companies reported better-than-expected fourth-quarter results.
General Motors, the world's largest automaker, reported flat fourth-quarter earnings after a one-time gain from the sale of its Hughes Electronics Corp. unit offset losses from restructuring charges and slower car sales.
Excluding the gain from Hughes and the restructuring charges, GM earned $674 million or $1.41 per share, topping analysts' expectations for a profit of $1.21 per share.
GM's 8.375 percent bonds due in 2033 traded at 1.97 percentage points more than Treasuries, about 0.07 percentage point tighter on the day, according to MarketAxess.
Citigroup, the world's largest financial services company, said fourth-quarter net profit nearly doubled as consumer and investment banking income climbed.
Citigroup's 3.5 percent notes due in 2008 traded at 0.14 percentage points more than Treasuries, about 0.03 percentage point tighter on the day, according to MarketAxess.
Strong quarterly earnings last week in the bank and brokerage sector have buttressed demand for corporate bonds, convincing investors to buy even with yield spreads near their lowest levels since 1998, strategists said.
"Eventually, investors will get tired of hoping for wider spreads and looking for fundamental weakness and conclude that they must take more risk before everyone else does in order to outperform," FTN Financial's head of credit strategy William Cunningham said in a recent report.
Spreads, the gap between yields on corporate bonds and Treasuries, have hovered near 5-year lows since early December.
Corporate bonds on average now yield just 0.91 percentage point more than Treasuries, according to Merrill Lynch & Co., the lowest since a 0.90 percentage point spread in August 1998.
In other markets, Treasury prices edged lower on profit-taking after recent hefty gains. Benchmark Treasury 10-year notes declined 7/32, yielding 4.056 percent.
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