By Nancy Leinfuss
NEW YORK, June 20 (Reuters) - U.S. corporate bond yield spreads opened weaker across the board on Friday while bonds of General Motors Corp. were driven out more substantially after the auto giant and its unit said they would issue $13 billion in bonds, traders said.
Spreads, the extra yields that corporate bonds pay over Treasuries, widened by 0.01 to 0.03 percentage point across the broader market, traders said. Bonds of the more economically sensitive auto sector widened by more, they said.
"The big story this morning is GM. Spreads came out by as much as 30 basis points after news of the offering," a trader said. "We saw some buying at those levels and then spreads improved by about 10 basis points," he said.
The world's largest automaker on Friday said it plans to sell $10 billion in debt and convertible securities to help shore up its underfunded pension plans and meet other retiree obligations.
The carmaker, whose U.S. pension plans were underfunded by $19.3 billion at the end of 2002, said it expects to make significant cash contributions to these funds by late 2003.
General Motors Acceptance Corp. (GMAC), GM's financial services unit, also will try to raise about $3 billion through debt offerings and plans to use the proceeds to fund ongoing operations, GM said.
GM's five-year paper was bid earlier at a 3.15 percentage point spread over Treasuries, versus 2.90 percentage point more late Thursday, traders said. Ford Motor debt was quoted wider by 0.05 percentage point over Treasuries at the open before narrowing back to unchanged levels later in the session, traders said.
U.S. junk bond mutual funds took in $716.9 million in the latest week, pushing total inflows this year to more than $21 billion amid the junk bond market's second-strongest rally on record. The inflow for the latest week, ended June 18, reported by AMG Data Services, followed a $1.33 billion inflow in the previous week. To see the full story, click [nN20228833].
For the year, junk bonds have seen total returns of 18.286 percent, outperforming all other bond asset classes. Investment grade corporates have returned 8.585 percent while Treasuries have seen total returns of just 4.488 percent, according to Merrill Lynch.
U.S. firms capitalized on hearty investor demand and low borrowing rates to sell $6 billion of investment grade issues, $3.5 billion of high yield deals and $1 billion of convertible offerings, this week.
To see other upcoming and recent sales, click on [nNEUBD4].