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US Corp Bonds-Spreads wider after heavy supply

By Dena Aubin

NEW YORK, Nov 21 (Reuters) - Yield spreads on U.S. corporate bonds were unchanged to a touch wider late on Friday after the week's flood of more than $17 billion in new high-grade debt garnered a mixed reception from investors.

"There seems to be a little better bid after selling off early, so we're almost back to unchanged," said one corporate bond trader.

Spreads, the extra yield corporate bonds pay over U.S. Treasuries, finished unchanged to 0.01 percentage point wider across the broader market, while bonds of more volatile automakers ended about 0.03 percentage point wider, traders said.

Although some of the week's larger deals struggled to find buyers, smaller issues sold well and their spreads tightened in the secondary market, investors said.

"Buyers are still receptive to infrequent issuers," said Michael Dineen, portfolio manager at MONY Capital Management. "We saw a lot of high-yield bonds coming, and that bodes well for the weaker end of the market. We've just got a tremendous amount of cash on the sidelines."

Companies sold about $1.6 billion of high-yield bonds in the week and nearly $2 billion of convertible securities, according to Reuters data. High-grade sales were expected to total about $17.4 billion.

Issuers are trying to line up their funding needs now rather than wait until year-end, when the market starts to slow down and liquidity starts to dry up, Dineen said.

Among the week's larger deals, New Jersey-based pharmaceutical company Schering-Plough Corp. was expected to sell $2.4 billion of debt late on Friday, up from an originally planned $1.75 billion. The issuer had to boost yields on the deal, however, to stir interest.

A 10-year tranche was expected to yield 1.20 percentage points more than Treasuries, up from early price talk of 1.0 percentage point more than Treasuries. The deal will also include 30-year bonds, expected to yield 1.55 percentage points more than Treasuries.

U.S. Treasury prices edged higher after twin bombings in Istanbul on Thursday spurred demand for safe-haven government debt. The benchmark 10-year Treasury note rose 2/32, yielding 4.15 percent.

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