GMAC plans to sell a 300 million euro 2-year note to yield 180 to 195 basis points over mid-swaps, a source familiar with the deal said on Monday. BNP Paribas and Royal Bank of Scotland are managing the sale.
GMAC debt has rallied sharply in the past week on hopes that a deal whereby GM spins off a stake in the financing unit to a highly-rated institution would allow it to return to investment-grade status.
"It has been a bit of a crazy session," said one trader. "GMAC CDS (are) 30 basis points tighter compared to the European close on Friday and similarly we saw a short-covering rally in GM corporate bonds which were as much as 5 points higher."
GM's 8.375 percent bond due 2033 was bid at 81 percent of face value, up 3 points on the day, the trader said.
The new bond deal, meanwhile, was expected to go well and provide a further boost to the market.
"It is a fairly cheap deal and it is only a small issue. The bond will go well. It is a kind of a pointer to the market that all is well," the trader said. "It's actually very positive for the market," said a syndicate banker at a bank away from the deal.Default swaps on Britain's Compass, the world's largest caterer, were volatile after a report in the Sunday Times that Clayton, Dubilier & Rice was eyeing the company and had approached investment banks to seek advice on a bid.
A Compass spokesman declined to comment.
Five-year default swaps traded up to 35 basis points wider on the day, at 135 basis points, a trader said, before retracing to 120 basis points by 1430 GMT.
Bond investors fear leveraged buyouts by private equity firms as the target company's balance sheet is loaded with debt to pay for the acquisition, reducing its creditworthiness. Elsewhere, action was extremely thin, traders said.
"We get some more numbers out of the US in the second half of the week, so maybe things will pick up then," said one telecoms trader in London. "At the moment we're just drifting on complete indifference."
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 38.1 basis points more than similarly-dated government bonds at 1450 GMT, 0.1 basis points more on the day.
US diversified manufacturer Parker Hannifin Corp plans to issue a two-part euro bond, the banks managing the sale said on Monday, offering some succour to a supply-starved investment-grade corporate bond market.
Citigroup and Morgan Stanley will manage the bond, which will be launched after a European roadshow starting on October 31.
A banker familiar with the sale said that the bond sale would comprise 5-year and 10-year tranches, with proceeds to be used to refinance the acquisition of British filter maker Domnick Hunter.
Parker Hannifin in September bid 251 million pounds ($443.8 million) for Domnick Hunter, leading rival bidder Eaton Corp to pull out of the running for the British company.