By Dena Aubin
NEW YORK, Oct 17 (Reuters) - U.S. corporate bond yield spreads wrapped up the week at their tightest levels since 1999 as a string of strong earnings reports boosted investor appetite for corporate debt.
Spreads, the extra yields that corporate bonds yield over Treasuries, edged tighter by about 0.01 percentage point on Friday, traders said.
"Issuance has been light this week and earnings have been coming in quite good, and that put a positive spin on the market," said John Tierney, director of credit strategy and credit derivatives research at Deutsche Bank.
Activity in the derivatives market, where hedge funds were ramping up new synthetic collateralized debt obligations, had also supported corporate spreads last week, although that activity has now slowed, Tierney said.
When new synthetic CDO deals are started, the originators sell default protection in the credit default swaps market to make up the deals' different tranches. Such selling of default protection pushes down default swap spreads and can also affect corporate spreads.
Corporate spreads on average dipped to 1.03 percentage points more than Treasuries on Thursday, their lowest level since May 1999, according to Merrill Lynch.
Spreads on automakers' bonds narrowed by as much as 0.45 percentage point this week after Ford Motor Co. and General Motors Corp. reported positive third-quarter results.
Ford's 7 percent notes due in 2013 traded at 2.53 percentage points more than Treasuries, about 0.10 percentage point tighter on the day and 0.36 percentage point tighter on the week, according to MarketAxess.
Yankee bonds, dollar-denominated bonds sold to U.S. investors by foreign issuers, are heading a relatively quiet primary market this week and next. State-owned Singapore Power Ltd. raised $1.6 billion this week in the city-state's largest ever debt issue.
Telecom Italia heads next week's calendar with a $2 billion offering that is already oversubscribed, market sources said.
In other markets, U.S. Treasuries enjoyed a bounce as bargain-hunters stepped in after two weeks of heavy selling. Treasury 10-year notes rose 17/32, yielding 4.396 percent.
To see upcoming and recent corporate bond sales, click on [nNEUBD4]. (Additional reporting by Eric Burroughs)