Intermediate corporate and Treasury securities have made junk bonds look like Scrooge so far this month, one economist's figures show.
According to John Lonski, senior economist at Moody's Investors Service, intermediate Treasuries had a total rate of return of 1.3% so far this month, while investment-grade corporates returned 1.2%. Junk returned 0.9%, despite its higher coupon.
"You're taking more risk," Lonski said of junk bond investing. So far in December, junk bond investors really haven't been rewarded for taking that risk.
The December figures imply that investors "are not really enthusiastic" about prospects for substantial improvement in the speculative-grade area.
"It's not that they are deserting these issues, but they are ... looking at the high-yield sector with more judiciousness," Lonski said.
In yesterday's secondary trading, spreads on high-grade corporate bonds finished unchanged in nearly nonexistent trading ahead of the Christmas holiday.
Describing the level of high-grade activity, one trader said, "It's basically slim to none, and slim's left town."
"High-grades didn't open today," another trader said.
High-yield bonds gained 1/4 point in the morning session, but the market closed for lack of interest by afternoon, one trader said.
"People just weren't there to buy and sell," he said.
In other news, Ford Motor Credit Co. filed a shelf registration with the Securities and Exchange Commission for up to $3 billion, a Ford spokeswoman said yesterday.
Ford, a unit of Ford Motor Co., will use proceeds to purchase receivables, for loans, and for debt retirement, she said.
At first, Ford may also apply proceeds to reducing short-term borrowings or investing temporarily in short-term securities, the spokeswoman said.
Rating News
Moody's Investors Service has downgraded the senior secured and senior subordinated notes of Playtex Family Products Corp., a wholly owned subsidiary of Playtex FP Group. The action affects about $670 million of long-term debt.
"The rating downgrades reflect Playtex's reduced debt coverage measurements and profit margins, lack of revenue growth despite several product restagings, and the highly competitive marketing environment for most of its product categories," a Moody's release says. "Nevertheless, the rating also considers Playtex's large market share position in the U.S. tampon and disposable nurser markets."
The agency lowered the company's guaranteed senior secured notes to B2 from Ba3, sentor subordinated notes to Caa from B2, and senior subordinated discount notes to Caa from B2.
Standard & Poor's Corp. announced that the CCC-minus subordinated debt rating of Mesa Inc. and its Mesa Capital Corp. and Mesa Operating Ltd. units will remain on Standard & Poor's' CreditWatch, where they were placed on Sept. 25. However, the agency has changed the implication to developing from positive.
The revision was made "given the potential that the company will breach its revolving credit's tangible adjusted equity covenant in the second half of 1993, placing Mesa in technical default," a Standard & Poor's release says.
A total of $600 million of subordinated debt is affected.
Duff & Phelps Credit Rating Co. has given an A rating to New York Telephone Co.'s shelf registration for $200 million of senior unsecured debt.
New York Telephone will use proceeds to refinance outstanding long-term debt and for general corporate purposes. The company also has $300 million on the shelf from a previous registration.
"New York Telephone operates in a highly competitive service territory, has high-cost operations, and an historically difficult regulatory environment," a Duff & Phelps release says. "However, advances in technology and re-engineering of work processes have led to lower expenses, which has boosted recent results above expectations."
