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Corporate bonds

finish lower

NEW YORK: US high-grade corporate bonds bounced off session lows but still closed markedly weaker along with US treasuries, analysts said on Monday.

After hitting day's low brought on by a "sloppy" two-year treasury note auction at mid-afternoon, corporate bonds gained ground partially due to government traders' short covering and bottom-fisheries beginning to buy the market, dealers said.

Yield spreads to treasuries held firm across most maturities as weak volume left outstanding spread levels untested.

Thinly staffed dealing rooms due to the long Easter weekend and a volatile treasury market demanding attention added up to low volume in corporate trading, dealers said.

A surprisingly strong March payroll report Friday ignited a sharp debt market sell-off which continued Monday. Dealers expected that Wednesday's five-year treasury auction could further weaken the market.

Chrysler debt remained unchanged despite news the car maker agreed to sell most of its aerospace and defense holdings to Raytheon for $475 million. The firm earlier pledged to shed some noncore businesses.

Opportunistic offerings are in the past, syndicate officials said, although they added that new issues may attempt to capitalise on upcoming short-term rallies.

However, they said they expect less interest rate sensitive, higher-yielding names to come to market to capitalise on the lack of new-issue supply.

Expected to price this week is a $1.1 billion first mortgage note offering by high-profile developer Donald Trump's Trump Atlantic City Associates and Trump Atlantic City Funding.

Yield talk was raised to tempt investors, but analysts said Monday the Trump notes are receiving a relatively warm reception, considering the artic new-issue climate.

Price talk rose to the 10.75 to 11.00 percent level from the 10.50 to 11.00 percent Friday for one of the biggest debt offerings ever in the junk-credit gaming market after the release of an unexpectedly strong US March payroll report battered US treasuries as well as corporate bonds.

"If they get this done inside 11 (percent yield)... that's a shot in the arm for the gaming industry", said Jack Barnes, associate vice president at Prudential Securities.

"It's unfortunate (for the issuers) that this week is starting out on such a negative note", he added.

Junk bond prices closed off one point in light trade in sympathy with a battered US stock market, high-yield traders said. US stocks fell by as much as 130 points in a delayed reaction to Friday's payrolls report as the market was closed in observance of Good Friday.

Supermarkets were down one to two points with Ralphs Grocery Co's 10.45 percent paper was bid off two points at 95.

Viacom 8.0 percent paper was bid 1-1/2 points lower at 94. Bally's Entertainment 9.25 percent paper was offered at 103-1/2, off 1-1/4 points.-Reuter