GM, Ford bonds to switch to junk market

GM, Ford bonds to switch to junk market

The bonds issued by the American auto giants GM and Ford went lower on Tuesday, as they would make an entry into the junk-bond market. The bonds were recently downgrades by the major ratings agencies and they have been pushed out of the investment-grade Lehman Aggregate Bond index.

Moving into the junk market would mean that the traders would be selling existing credits to make way for the flood of new paper from GM and Ford. IDEAglobal bond analyst John Atkins said in a statement about these bonds: “Ford and GM are among the biggest volume movers of the day but the mood is pretty upbeat. We’re seeing a very broad retracement move including the autos heading into end of month. Spreads are still wider since end of last month but a lot of the interim hand-wringing is over.”

The companies are due to release their statistics of automobile sales today, which should help them, prove their resilience. However, analysts believe that the consumer is no longer enticed to visit the showrooms of these automakers as the sales are expected to fall by almost 10% for both these companies.