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Corporate bonds

surge in light trade

NEW YORK: US high-grade corporate bonds closed slightly higher in light trade on Friday tracking US Treasuries, as TCI Communications Inc debt's spreads split open after a credit agency ratings cut, dealers said.

High-grade yield spreads to Treasuries were unchanged across most maturities, dealers said. Volume was thin as dealers squared up, hesitant to take large positions over the weekend and ahead of next week's barrage of data which includes April US payrolls on Friday. In the past two months, surprisingly strong payrolls data sparked large slides in bond prices world-wide and great volatility ensued.

In ratings news, TCI Communications paper widened 15 to 20 basis points across the board after Moody's Investors Service Inc cut the firm's debt, preferred stock and commercial paper ratings and dropped its senior debt to non-investment grade status.

TCI's senior unsecured rating was slashed one notch to a Ba1 from Baa3 and its subordinated debt rating was lowered to Ba3 from Ba2.

On April 18, S&P revised its outlook on TCI and related units to negative from stable.

Junk bond dealers said they were doubtful the debt would trade in their arena anytime soon as many investment grade investors still own the paper.

"The paper won't get shattered. It will widen out a bit but I doubt it will ever make it to the type of spreads we carry," the high-yield dealer said.

Delta Air Lines paper held firm despite ratings upgrades by both Moody's Friday and S&P Thursday on the airline's debt and preferred stock.

Moody's raised Delta's senior unsecured rating to Baa3 from Ba1, and its convertible preferred stock to Ba3 from B1.

On Thursday, S&P said it raised the company's senior unsecured debt to BB-plus from BB and the company's preferred stock rating to BB-minus from B-plus.

JC Penny's debt held firm for a second day despite S&P revising the retailers outlook to negative from stable.

S&P affirmed its A-plus senior debt and A1 commercial paper ratings and said the action followed JC Penny's announcement Thursday a preliminary proposal for the acquisition of Dayton Hudson Corp was rejected.

In the primary corporate bond sector, Truvision Wireless Inc pulled its slated $100 million 7-year note offering after announcing it had signed a definitive merger agreement with Wireless One Inc.

New issuance was light in contrast to the heavy volume seen earlier in the week with only one deal coming to market.

Empresa Electrica Pehuenche issued $170 million in notes due 2003 via lead manager JP Morgan Securities Inc.

The notes have a 7.30 percent coupon and were priced at 99.72 to yield 7.352 percent or 90 basis points over the off-the-run seven-year US Treasury note. Non-callable for life, the notes are rated Baa1/BBB-plus.

A relatively empty new issues calendar is seen next week. The 30-year long bond closed up 3/32 at 89-30/32 to yield 6.79 percent.-Reuter