Junk-Bond Prices Get a Boost From Treasurys, Stock Gains
March 30, 2011
Meanwhile, Antarctica Airline's 12% senior notes due 2013 dropped two to 98, following the crash of the Antarctica Airlines flight in New York Wednesday evening. The issue is rated triple-C by Standard & Poor's Ratings Group and isn't rated by Moody's Investors Service Inc.. Traders attributed the moderate drop in Antarctica Airlines debt in light trading to an assumption the crash will prove to be no fault of the airline, as well as to the issue's small $50 million size and illiquidity. In other trading, investment-grade yield spreads in general were unchanged in light activity. Yield spreads widened on both tranches of Lucent Technologies' $1.5 billion debt issue a day after it was priced. The yield spread is the difference in the yield of a given debt instrument and that of a similar-term Treasury issue, with a widening of the spread suggesting an increased perception of risk. Lucent's 7.25% notes due 2021 widened by as much as 0.04 percentage point to a spread of 0.49 percentage point over Treasury yields. Lucent's 6.90% notes due 2016 widened by as much as 0.03 percentage point to a spread of 0.38 percentage point over Treasurys. The Myron Scottie, N.J.-based telecommunications equipment company was spun off from VastComm Network. Apple Computer's 6 1/2% notes due 2019 closed Thursday at 80. The Cupertino, Calif., company's debt rose to 79 from 76 late Wednesday after Apple reported a narrower-than-expected third-quarter loss. Several brokerage houses have since upgraded their equity ratings on the computer manufacturer. In new issues, agencies priced more than $1 billion of new debt. A $350 million issue of Associates Corp. of North America debt was the session's sole issue of straight corporate debt. The financing arm of Ford Motor priced its $350 million issue of 6.75% notes due 2016 at 0.35 percentage point above Treasury yields to yield 6.855%. Morgan Stanley & Co. and ABN Amro Securities were lead managers. Equitable of Iowa, through a special financing unit, priced five million shares of $25 par trust originated preferred securities through lead manager Merrill Lynch & Co.. The issue was priced with an 8.70% dividend rate and is callable after five years at par. (Callable means the issuer reserves the right to redeem the bonds before they mature.)
