AT&T Inc. (NYSE:T)
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It was another day of zero issuance and lethargic trading in the U.S. corporate bond world, but once again sentiment continued to improve and should set up the New Year for a spirited beginning.
Markit's basket of investment-grade derivatives, the CDX NA IG, improved by 2.1% Thursday, marking the third straight advance. The index now sits at 121.6, the lowest since Dec. 7.
The index tracks the price of derivatives that pay investors when corporate bonds fail, so a lower figure indicates an improvement in sentiment. On Dec. 19, the index was nearly 11 points higher at 132.3.
Improvement is less evident among individual bonds, however, as trading is thin and investors are unwinding risky positions.
"Shops are closing up, people don't want to extend credit out there or buy stuff, and the new-issue spigot has been turned off," said Scott MacDonald, senior managing director at Aladdin Capital.
Just $5.25 billion of investment-grade bonds changed hands Thursday, as of 3:30 p.m EST, versus a daily average last month of $9.98 billion, according to MarketAxess.
The most active investment-grade bonds were mixed with trading concentrated on short-term debt. Seven of the 10 most actively traded bonds mature within 18 months, according to MarketAxess.
Among the longer-term bonds, AT&T (T) 2.95% coupon bonds due in 2016 deteriorated by three basis points to a spread of 1.10 percentage points over Treasurys; Morgan Stanley (MS) bonds due in 2013 worsened by 32 basis points to a spread of 4.33 percentage points.
An improvement in sentiment was more transparent among high-yield or junk bonds, where eight of the top ten most actively traded improved on the day, some substantially so.
Dish DBS Corp. (DISH) 7.75% coupon bonds maturing in 2015 improved 27 basis points to a spread of 3.52 percentage points, and Offshore Group Investments Ltd. (VTG) 11.5% coupon bonds due in 2015 improved 38 basis points, according to MarketAxess.
The iShares iBoxx high-yield corporate bond exchange-traded fund, which goes by the ticker HYG, rose 0.37% on the day. For the week it is up 1.52%; month-to-date is has climbed 2.81%.
High-yield bonds saw $1.9 billion of overall trading, compared with last month's average of $3.53 billion, MarketAxess data shows.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382; email@example.com