US bond market moved by GM downgrade

Two factors were instrumental in activity in U.S. bond markets on Friday.

Thursday’s downgrade of General Motors’ and Ford’s credit ratings by Standard and Poor’s, followed by a stronger than expected U.S. jobs report on Friday combined to send bond prices down and yields up in both the government and corporate bond markets.

By early Friday, yields on 2-year U.S. government bonds had risen by 15 basis points to 3.68 percent, and yields on 30-year bonds had risen to 4.63 percent, up by 5 basis points.

In the corporate bond market, there was only a mild reaction to the downgrade of GM and Ford. While the move was not expected so soon, it was expected that it would have to happen at some point.

The high-yield market was trading at yields of approximately 413 basis points higher than Treasure bonds, which was around the same level it was trading at on Wednesday, before the downgrades were announced.

Meanwhile, the downgrade of the two carmaker’s credit ratings sent bond prices in both companies sharply lower in both the United States and Europe.

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