UPDATE 1-Journal Register says risks default by July

Reuters: [2008-05-09 23:00:00]

By Robert MacMillan

NEW YORK, May 9 (Reuters) - U.S. newspaper publisher Journal Register Co <JRCO.PK> said on Friday it may risk defaulting on its debt by this July unless there is significant improvement in its operating results.

The publisher of the New Haven Register said it may violate its debt covenant by July 23, barring better second-quarter performance or an amendment to its credit agreement.

"There can be no assurance that the company will see significant improvements in its operating results or that the lenders will agree to any such amendment," the company wrote in a filing with the U.S. Securities and Exchange Commission.

Journal Register reported a net loss of $72.2 million, or $1.84 a share, for the first quarter, compared with net profit of $29.1 million, or 74 cents a share, in the first quarter a year ago.

The loss includes a charge of $1.78 a share for write-downs related to its New York and Michigan papers. Excluding special items this year and last, the company's loss was 6 cents a share compared with a profit of 4 cents a share last year.

Revenue fell 10.3 percent to $102.4 million.

Ad revenue fell 12.1 percent to $75.9 million, while online revenue climbed 22.8 percent and now represents 6.4 percent of Journal Register's total revenue.

The Yardley, Pennsylvania-based company was delisted from the New York Stock Exchange after its stock fell well below minimum compliance standards. Journal Register also has hired Lazard Freres to review its options, which include filing for bankruptcy.

Journal Register is the leftover company from the former newspaper publishing empire owned by Ralph Ingersoll II in the 1980s. The company nearly went bankrupt late in that decade after bingeing on junk bonds to finance acquisitions and then being unable to pay its debt.

In the late 1980s it embarked on an ill-fated effort to start a rival daily paper to Missouri's St. Louis Post-Dispatch, which was then owned by Pulitzer Inc and now is part of Lee Enterprises Inc <LEE.N>. The paper folded in less than a year.

Journal Register embarked on another ambitious plan in 2004, buying a cluster of newspapers in Michigan for $415 million, just before newspaper ad sales started tanking and automakers' problems started dragging down the local economy.

The company's shares rose 2 cents to close at 30 cents on Friday. (Editing by Toni Reinhold) ((robert.macmillan@thomsonreuters.com; +1 646 223 6012; Reuters Messaging: robert.macmillan.reuters.com@reuters.net)) Click on http://blogs.reuters.com/category/themes/mediafile/ to see Reuters MediaFile blog Keywords: JOURNALREGISTER/

Forward Calendar - U.S. corporate bond new issues

Reuters: [2008-05-09 21:33:00]

    May 9 (Reuters) - The following are lists of upcoming high-grade and 
high-yield corporate bond offerings in the United States. The information was 
gathered from IGM CorporateWatch, and other market sources: 
 
*Denotes 144a private placement debt offering. 
 
HIGH-GRADE BOND SALES EXPECTED FOR WEEK OF 5/5/2008                           
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
Alabama Power     $300 mln    30-yr      A2/A/A+        CITI/LEH           5/8 
AT&T              $750 mln     5-yr      A2/A/A         BAS/DB/MS/UBS      5/8 
AT&T              $1.0 bln    10-yr      A2/A/A         BAS/DB/MS/UBS      5/8 
AT&T              $1.25 bln   30-yr      A2/A/A         BAS/DB/MS/UBS      5/8 
Bank of America   $1.0 bln     2-yr frn  Aaa/AA+/NA     BAS                5/5 
Bank of America   $1.7 bln     2-yr frn  Aaa/AA+/NA     BAS                5/5 
Berkshire Hath    $1.0 bln     5-yr      Aaa/AAA/AAA    GS                 5/6 
Berkshire Hath    $1.0 bln    10-yr      Aaa/AAA/AAA    GS                 5/6 
Citigroup         $3.0 bln    10-yr      Aa3/AA-/AA-    CITI               5/5 
Citigroup         $550 mln    10-yr frn  Aa3/AA-/AA-    CITI               5/6 
Citigroup         $2.0 bln    perpetuals A2/A/A+        CITI               5/6 
Coca-Cola Ent.    $275 mln     3-yr frn  A3/A/A         DB/JPM             5/7 
Colgate-Palmolive $250 mln     5-yr      Aa3/AA-/AA-    GS/CITI/MS         5/7 
ConocoPhillips    $400 mln     5-yr      A1/A/A         CITI/RBSGC         5/5 
ConocoPhillips    $500 mln    10-yr      A1/A/A         CITI/RBSGC         5/5 
ConocoPhillips    $600 mln    30-yr      A1/A/A         CITI/RBSGC         5/5 
Duke Realty       $325 mln     5-yr      Baa1/BBB+/BBB  WB                 5/5 
GlaxoSmithKline   $1.0 bln     2-yr frn  A1/A+/AA-      CITI/JPM/LEH       5/6 
GlaxoSmithKline   $2.5 bln     5-yr      A1/A+/AA-      CITI/JPM/LEH       5/6 
GlaxoSmithKline   $2.75 bln   10-yr      A1/A+/AA-      CITI/JPM/LEH       5/6 
GlaxoSmithKline   $2.75 bln   30-yr      A1/A+/AA-      CITI/JPM/LEH       5/6 
*Grupo Televisa   $500 mln    10-yr      Baa1/BBB+/BBB+ HSBC/JPM           5/6 
*GTL Trade Fin    $500 mln    10-yr      NR/BBB-/BBB-   ABN/HSBC/JPM       5/9 
Hartford Fin Svs  $500 mln  10.5-yr      A2/A/A+        DB/GS/ML           5/7 
Keycorp           $750 mln     5-yr      A2/A-/A        CITI/CS/KEY/UBS    5/7 
Korea Railrod     $300 mln     5-yr      A2/A/NA        CITI/HSBC/MS       5/8 
Merrill Lynch     $1.75 bln   30-yr      A2/A/A         ML                 5/7 
Merrill Lynch     $1.2 bln     2-yr frn  A1/A+/A        ML                 5/7 
Morgan Stanley    $2.0 bln     2-yr frn  Aa3/AA-/AA-    MS                 5/9 
Morgan Stanley    $2.0 bln     7-yr      Aa3/AA-/AA-    MS                 5/9 
JP Mgn Chase Cap  $1.6 bln    70-yr      Aa3/A/A+       JPM                5/7 
Regions Bank      $400 mln    10-yr      A2/A/A         GS/JPM/LEH/ML      5/9 
*SMFG Pref Cap    $1.8 bln    perpetuals A2/BBB+/NA     DAIWA/GS/JPM/UBS   5/7 
Transalta Corp    $500 mln    10-yr      Baa2/BBB/NA    CITI/HSBC          5/6 
Travelers         $500 mln    10-yr      A3/A-/A        CITI/LEH           5/8 
------------------------------------------------------------------------------ 
SPLIT-RATED BOND SALES EXPECTED FOR WEEK OF 5/5/2008                          
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
PS of New Mexico  $350 mln    10-yr      Baa3/BB+/NA    LEH/ML             5/8 
------------------------------------------------------------------------------ 
CONVERTIBLE BOND SALES EXPECTED FOR WEEK OF 5/5/2008                          
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
 
------------------------------------------------------------------------------ 
HIGH-YIELD BOND SALES EXPECTED FOR WEEK OF 5/5/2008                           
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
*Atlas Energy     $150 mln    10-yr      B3/B/NA        JPM/WACH           5/6 
*DIRECTV Hldgs/LLC$1.35 bln    8-yr      Ba3/BB/NA      JPM/BAS/CS         5/7 
*Newfield Explor  $600 mln    10-yr      Ba3/BB-/NA     JPM/MS             5/5 
------------------------------------------------------------------------------ 
UPCOMING DEALS                                                                
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
------------------------------------------------------------------------------ 
PREVIOUS HIGH-GRADE BOND SALES                                                
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
AMB Property LP   $325 mln     5-yr mtn  Baa1/BBB/BBB+  BAS/JPM/MS        4/28 
*Bank of Montreal $2.5 bln    6-yr ext   A1/A+/NA       BMO/GS/MS         4/29 
Bristol-Myers     $600 mln    10-yr      A2/A+/A        BAS/JPM/MS        4/28 
Bristol-Myers     $1.0 bln    30-yr      A2/A+/A        BAS/JPM/MS        4/28 
Chubb Corp        $600 mln    10-yr      A2/A/A+        CITI/GS/ML         5/1 
Chubb Corp        $600 mln    30-yr      A2/A/A+        CITI/GS/ML         5/1 
Comcast           $1.0 bln    10-yr      Baa2/BBB+/BBB+ CITI/DB/ML/UBS     5/2 
Comcast           $1.0 bln    30-yr      Baa2/BBB+/BBB+ CITI/DB/ML/UBS     5/2 
Credit Suisse NY  $4.0 bln     5-yr mtn  Aa1/AA-/AA-    CS                 5/1 
Dow Chemical      $800 mln    10-yr      A3/A-/A-       HSBC/ML/RBSGC      5/1 
*Genworth Life    $500 mln     5-yr      Aa3/AA-/NA     BAS/WACH          4/29 
*Israel Electric  $1.0 bln    10-yr      Baa2/BBB+/NA   CITI/LEH           5/2 
Jackson Nat'l     $300 mln     5-yr      A1/AA/NA       BAS/MS             5/1 
KeyBank NA        $300 mln     7-yr      A2/A-/A-       CITI/CS/UBS        5/1 
KLA-Tencor        $750 mln    10-yr      Baa1/BBB/BBB   ML                4/29 
Lehman Bros Hldgs $2.0 bln    30-yr      A2/A/A+        LEH                5/2 
Morgan Stanley    $2.0 bln    10-yr      Aa3/AA-/AA-    MS                 5/2 
*NY Life Global   $1.0 bln     5-yr      Aaa/AAA/NA     DB/ML/WB           5/2 
*Pearson Dollar   $350 mln     5-yr      Baa1/BBB+/NA   BARC/BNP/CITI     4/29 
*Pearson Dollar   $550 mln    10-yr      Baa1/BBB+/NA   BARC/BNP/CITI     4/29 
Prologis          $600 mln    10-yr      Baa1/BBB+/BBB+ CITI/GS/RBSGC      5/1 
------------------------------------------------------------------------------ 
PREVIOUS SPLIT-RATED BOND SALES                                               
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
Centerpoint Engy  $300 mln    10-yr      Ba1/BBB-/BBB-  LEH/RBSGC/WB       5/1 
------------------------------------------------------------------------------ 
PREVIOUS HIGH-YIELD BOND SALES                                                
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
Ford Motor Credit $1.1 bln     7-yr      B1/B/BB-       JPM               4/29 
*MarkWest Engy    $100 mln    10-yr      B2/B/NA        JPM/RBC/WACH      4/28 
------------------------------------------------------------------------------ 
PREVIOUS CONVERTIBLE SECURITIES SALES                                         
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
------------------------------------------------------------------------------ 
DEALS RECENTLY POSTPONED 
COMPANY           AMT         MAT/DEBT   RTGS           MGRS    DATE POSTPONED 
Bunge Ltd Fin     $TBA         5-yr     Baa2/BBB-/BBB  BNP/HSBC/JPM/RBSGC 3/12 
Bunge Ltd Fin     $TBA        10-yr     Baa2/BBB-/BBB  BNP/HSBC/JPM/RBSGC 3/12 
------------------------------------------------------------------------------ 
MANAGERS:                          SYNDICATE DESK NUMBERS: 
                                   GENERAL       HIGH-YIELD    HIGH-GRADE 
ABN -  ABN Amro Securities Inc                   212-409-7563  212-409-7563 
BAS -  Banc of America Securities                212-583-8352  212-933-3433 
BOCM - Banc One Capital Markets    312-732-7885  312-336-2525 
BARC - Barclays Capital                          212-412-2626  212-412-6730 
BEAR - Bear Stearns & Co                         212-272-5007  212-272-5371 
BNP  - BNP Paribas                               212-841-3658  212-841-3658 
CITI - Citigroup Global Markets                  212-723-6001  212-723-6121 
CS -   Credit Suisse                             212-325-3290  212.325-3325 
DBS  - Deutsche Bank Securities Inc              312-336-2525  312-732-1476 
GS   - Goldman Sachs & Co                        212-902-8204  212-902-5954 
JPM  - J.P. Morgan Chase & Co                    212-270-1100  212-834-4533 
KBW  - Keefe Bruyette & Woods      212-887-7777                            
LEH  - Lehman Brothers Inc                       212-526-9664  212-526-9664 
ML   - Merrill Lynch & Co                        212-449-6762  212-449-4949 
MS   - Morgan Stanley                            212-761-1286  212-761-1957 
UBS  - UBS Investment Bank                       203-719-1556  203-719-1088 
WACH - Wachovia Securities                       704-383-1928  704-383-7727 
    ((U.S. Financial Desk 646-223-6330)) 
Keywords: MARKETS CORPORATEBONDS CALENDAR 
    

Forward Calendar - U.S. corporate bond new issues

Reuters: [2008-05-09 20:59:00]

    May 9 (Reuters) - The following are lists of upcoming high-grade and 
high-yield corporate bond offerings in the United States. The information was 
gathered from IGM CorporateWatch, and other market sources: 
 
*Denotes 144a private placement debt offering. 
 
HIGH-GRADE BOND SALES EXPECTED FOR WEEK OF 5/5/2008                           
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
Alabama Power     $300 mln    30-yr      A2/A/A+        CITI/LEH           5/8 
AT&T              $750 mln     5-yr      A2/A/A         BAS/DB/MS/UBS      5/8 
AT&T              $1.0 bln    10-yr      A2/A/A         BAS/DB/MS/UBS      5/8 
AT&T              $1.25 bln   30-yr      A2/A/A         BAS/DB/MS/UBS      5/8 
Bank of America   $1.0 bln     2-yr frn  Aaa/AA+/NA     BAS                5/5 
Bank of America   $1.7 bln     2-yr frn  Aaa/AA+/NA     BAS                5/5 
Berkshire Hath    $1.0 bln     5-yr      Aaa/AAA/AAA    GS                 5/6 
Berkshire Hath    $1.0 bln    10-yr      Aaa/AAA/AAA    GS                 5/6 
Citigroup         $3.0 bln    10-yr      Aa3/AA-/AA-    CITI               5/5 
Citigroup         $550 mln    10-yr frn  Aa3/AA-/AA-    CITI               5/6 
Citigroup         $2.0 bln    perpetuals A2/A/A+        CITI               5/6 
Coca-Cola Ent.    $275 mln     3-yr frn  A3/A/A         DB/JPM             5/7 
Colgate-Palmolive $250 mln     5-yr      Aa3/AA-/AA-    GS/CITI/MS         5/7 
ConocoPhillips    $400 mln     5-yr      A1/A/A         CITI/RBSGC         5/5 
ConocoPhillips    $500 mln    10-yr      A1/A/A         CITI/RBSGC         5/5 
ConocoPhillips    $600 mln    30-yr      A1/A/A         CITI/RBSGC         5/5 
Duke Realty       $325 mln     5-yr      Baa1/BBB+/BBB  WB                 5/5 
GlaxoSmithKline   $1.0 bln     2-yr frn  A1/A+/AA-      CITI/JPM/LEH       5/6 
GlaxoSmithKline   $2.5 bln     5-yr      A1/A+/AA-      CITI/JPM/LEH       5/6 
GlaxoSmithKline   $2.75 bln   10-yr      A1/A+/AA-      CITI/JPM/LEH       5/6 
GlaxoSmithKline   $2.75 bln   30-yr      A1/A+/AA-      CITI/JPM/LEH       5/6 
*Grupo Televisa   $500 mln    10-yr      Baa1/BBB+/BBB+ HSBC/JPM           5/6 
*GTL Trade Fin    $500 mln    10-yr      NR/BBB-/BBB-   ABN/HSBC/JPM       5/9 
Hartford Fin Svs  $500 mln  10.5-yr      A2/A/A+        DB/GS/ML           5/7 
Keycorp           $750 mln     5-yr      A2/A-/A        CITI/CS/KEY/UBS    5/7 
Korea Railrod     $300 mln     5-yr      A2/A/NA        CITI/HSBC/MS       5/8 
Merrill Lynch     $1.75 bln   30-yr      A2/A/A         ML                 5/7 
Merrill Lynch     $1.2 bln     2-yr frn  A1/A+/A        ML                 5/7 
JP Mgn Chase Cap  $1.6 bln    70-yr      Aa3/A/A+       JPM                5/7 
Regions Bank      $400 mln    10-yr      A2/A/A         GS/JPM/LEH/ML      5/9 
*SMFG Pref Cap    $1.8 bln    perpetuals A2/BBB+/NA     DAIWA/GS/JPM/UBS   5/7 
Transalta Corp    $500 mln    10-yr      Baa2/BBB/NA    CITI/HSBC          5/6 
Travelers         $500 mln    10-yr      A3/A-/A        CITI/LEH           5/8 
------------------------------------------------------------------------------ 
SPLIT-RATED BOND SALES EXPECTED FOR WEEK OF 5/5/2008                          
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
PS of New Mexico  $350 mln    10-yr      Baa3/BB+/NA    LEH/ML             5/8 
------------------------------------------------------------------------------ 
CONVERTIBLE BOND SALES EXPECTED FOR WEEK OF 5/5/2008                          
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
 
------------------------------------------------------------------------------ 
HIGH-YIELD BOND SALES EXPECTED FOR WEEK OF 5/5/2008                           
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
*Atlas Energy     $150 mln    10-yr      B3/B/NA        JPM/WACH           5/6 
*DIRECTV Hldgs/LLC$1.35 bln    8-yr      Ba3/BB/NA      JPM/BAS/CS         5/7 
*Newfield Explor  $600 mln    10-yr      Ba3/BB-/NA     JPM/MS             5/5 
------------------------------------------------------------------------------ 
UPCOMING DEALS                                                                
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
------------------------------------------------------------------------------ 
PREVIOUS HIGH-GRADE BOND SALES                                                
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
AMB Property LP   $325 mln     5-yr mtn  Baa1/BBB/BBB+  BAS/JPM/MS        4/28 
*Bank of Montreal $2.5 bln    6-yr ext   A1/A+/NA       BMO/GS/MS         4/29 
Bristol-Myers     $600 mln    10-yr      A2/A+/A        BAS/JPM/MS        4/28 
Bristol-Myers     $1.0 bln    30-yr      A2/A+/A        BAS/JPM/MS        4/28 
Chubb Corp        $600 mln    10-yr      A2/A/A+        CITI/GS/ML         5/1 
Chubb Corp        $600 mln    30-yr      A2/A/A+        CITI/GS/ML         5/1 
Comcast           $1.0 bln    10-yr      Baa2/BBB+/BBB+ CITI/DB/ML/UBS     5/2 
Comcast           $1.0 bln    30-yr      Baa2/BBB+/BBB+ CITI/DB/ML/UBS     5/2 
Credit Suisse NY  $4.0 bln     5-yr mtn  Aa1/AA-/AA-    CS                 5/1 
Dow Chemical      $800 mln    10-yr      A3/A-/A-       HSBC/ML/RBSGC      5/1 
*Genworth Life    $500 mln     5-yr      Aa3/AA-/NA     BAS/WACH          4/29 
*Israel Electric  $1.0 bln    10-yr      Baa2/BBB+/NA   CITI/LEH           5/2 
Jackson Nat'l     $300 mln     5-yr      A1/AA/NA       BAS/MS             5/1 
KeyBank NA        $300 mln     7-yr      A2/A-/A-       CITI/CS/UBS        5/1 
KLA-Tencor        $750 mln    10-yr      Baa1/BBB/BBB   ML                4/29 
Lehman Bros Hldgs $2.0 bln    30-yr      A2/A/A+        LEH                5/2 
Morgan Stanley    $2.0 bln    10-yr      Aa3/AA-/AA-    MS                 5/2 
*NY Life Global   $1.0 bln     5-yr      Aaa/AAA/NA     DB/ML/WB           5/2 
*Pearson Dollar   $350 mln     5-yr      Baa1/BBB+/NA   BARC/BNP/CITI     4/29 
*Pearson Dollar   $550 mln    10-yr      Baa1/BBB+/NA   BARC/BNP/CITI     4/29 
Prologis          $600 mln    10-yr      Baa1/BBB+/BBB+ CITI/GS/RBSGC      5/1 
------------------------------------------------------------------------------ 
PREVIOUS SPLIT-RATED BOND SALES                                               
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
Centerpoint Engy  $300 mln    10-yr      Ba1/BBB-/BBB-  LEH/RBSGC/WB       5/1 
------------------------------------------------------------------------------ 
PREVIOUS HIGH-YIELD BOND SALES                                                
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
Ford Motor Credit $1.1 bln     7-yr      B1/B/BB-       JPM               4/29 
*MarkWest Engy    $100 mln    10-yr      B2/B/NA        JPM/RBC/WACH      4/28 
------------------------------------------------------------------------------ 
PREVIOUS CONVERTIBLE SECURITIES SALES                                         
COMPANY           AMT         MAT/DEBT   RTGS           MGRS            PRICED 
------------------------------------------------------------------------------ 
DEALS RECENTLY POSTPONED 
COMPANY           AMT         MAT/DEBT   RTGS           MGRS    DATE POSTPONED 
Bunge Ltd Fin     $TBA         5-yr     Baa2/BBB-/BBB  BNP/HSBC/JPM/RBSGC 3/12 
Bunge Ltd Fin     $TBA        10-yr     Baa2/BBB-/BBB  BNP/HSBC/JPM/RBSGC 3/12 
------------------------------------------------------------------------------ 
MANAGERS:                          SYNDICATE DESK NUMBERS: 
                                   GENERAL       HIGH-YIELD    HIGH-GRADE 
ABN -  ABN Amro Securities Inc                   212-409-7563  212-409-7563 
BAS -  Banc of America Securities                212-583-8352  212-933-3433 
BOCM - Banc One Capital Markets    312-732-7885  312-336-2525 
BARC - Barclays Capital                          212-412-2626  212-412-6730 
BEAR - Bear Stearns & Co                         212-272-5007  212-272-5371 
BNP  - BNP Paribas                               212-841-3658  212-841-3658 
CITI - Citigroup Global Markets                  212-723-6001  212-723-6121 
CS -   Credit Suisse                             212-325-3290  212.325-3325 
DBS  - Deutsche Bank Securities Inc              312-336-2525  312-732-1476 
GS   - Goldman Sachs & Co                        212-902-8204  212-902-5954 
JPM  - J.P. Morgan Chase & Co                    212-270-1100  212-834-4533 
KBW  - Keefe Bruyette & Woods      212-887-7777                            
LEH  - Lehman Brothers Inc                       212-526-9664  212-526-9664 
ML   - Merrill Lynch & Co                        212-449-6762  212-449-4949 
MS   - Morgan Stanley                            212-761-1286  212-761-1957 
UBS  - UBS Investment Bank                       203-719-1556  203-719-1088 
WACH - Wachovia Securities                       704-383-1928  704-383-7727 
    ((U.S. Financial Desk 646-223-6330)) 
Keywords: MARKETS CORPORATEBONDS CALENDAR 
    

EURO GOVT-Bunds catch safe-haven bid, peripherals sell-off

Reuters: [2008-05-09 17:47:00]

By Kirsten Donovan

LONDON, May 9 (Reuters) - Top-quality euro zone government bonds advanced on Friday as sagging share prices boosted the appeal of safe-haven Bunds and as markets weighed the previous day's comments from the European Central Bank.

European equities fell as banks and other financials dragged on the market, while Wall Street dropped as it reacted to the record loss posted by the world's number one insurer American International Group <AIG.N> after the closing bell on Thursday.

Crude oil's surge to a new peak above $125 a barrel also hit stocks, exacerbating fears about inflation and a deteriorating U.S. economy.

Bunds reaped the benefit of safe-haven flows and pushed ahead, with 10-year yields falling to their lowest in three weeks to below the key psychological 4 percent level, helped by some observers perceiving that the ECB had slightly softened its monetary policy stance after keeping rates steady at 4 percent on Thursday.

But peripheral debt, such as that issued by Italy sold off.

"The key flow today has been the ongoing selling of peripherals, especially Italy," said a trader.

"Peripheral spreads have had a good run recently but now stocks are looking a bit wobbly, credit spreads are widening and these bonds trade like a high risk asset nowadays."

At 1528 GMT, June Bund futures <FGBLM8> were 59 ticks higher at 115.12. Two-year cash yields <EU2YT=RR> were down 5 basis points at 3.663 percent, while 10-year yields <EU10YT=RR> were 7 basis points lower at 3.997 percent.

Italian 10-year spreads widened a further 4 basis points on Friday, with Greek 10-year spreads about 3.5 basis points wider.

Euribor contracts from December onwards outperformed the front-end of the 2008 strip which still indicates no chance of an interest rate cut from the ECB this year.

ECB President Jean-Claude Trichet said on Thursday that the bank's Governing Council was unanimous in its decision to leave rates on hold but did not rule out a future reappearance of the word "vigilance" -- a past harbinger of rate rises.

Bank of America said the key issues when thinking about the interest rate outlook are whether economic growth in the euro zone will continue to weaken in coming months, and how the exchange rate of the euro <EUR=> will respond.

Head of strategy Riccardo Barbieri says based on the past couple of weeks the currency could respond "relatively strongly" to an economic downturn and unless food and energy prices fell at the same time, the ECB may be forced to remain on hold.

"It is entirely conceivable that the ECB will remain on hold throughout the credit-market crisis, with money market and bank lending rates perhaps edging down in 2009 by virtue of a tightening in the Euribor/Eonia spread."

The ECB also said on Friday that euro zone banks are making it harder for companies and households to borrow money, clamping down on lending as the credit crisis bites [ID:nL09835231].

Since the global credit crisis hit last summer, banks have found it harder to obtain funds to lend to firms and consumers, and also become more cautious about who they lend to.

The interbank cost of borrowing three-month dollar funds fell at Friday's daily Libor fixing, while sterling spreads notably tightened after the Bank of England on Thursday left rates on hold [ID:nL09633122].

Meanwhile, 2-year swap rates <EURAB6E2Y=> fell to 4.421 from around 4.5 percent before the ECB rate decision, while 10-year rates <EURAB6E10Y=> were at 4.456 from 4.500 percent at Thursday's close.

The 10-year swap spread widened to 46 basis points. ((Reporting by Kirsten Donovan; kirsten.donovan.reuters.com@reuters.net, +44 20 7542 8675))

Keywords: MARKETS BONDS EURO

--------------MARKET SNAPSHOT AT 1536 GMT ------------------     
Futures continuous contract basis      
                   FUTURES          CASH YIELD   
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EURO CORP-Credit spreads steady despite equity gloom

Reuters: [2008-05-09 16:47:00]

By Richard Barley

LONDON, May 9 (Reuters) - European credit spreads were little changed on Friday, widening initially and then staging a small rally late in the session, despite a gloomy day for global equities in the wake of a big loss by U.S. insurer AIG <AIG.N>.

By 1430 GMT, the investment-grade Markit iTraxx Europe index <ITRAC5EA=GFI> was at 80 basis points, according to Markit data, unchanged versus late on Thursday. The index is 16 basis points wider versus last Friday.

The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits, was 4 basis points wider at 458 basis points. The Crossover is some 60 basis points wider versus last Friday.

The link between credit and equity markets has been broken in recent sessions after a long period in which prices moved in tandem, with credit having sharply outperformed stocks over that time.

"We've gone wider over the last few days and decoupled from stocks a little bit," said a trader in London, adding that flows on Friday were light.

"We're just seeing some bids get hit now and we may have a little rally into the close."

Many analysts have warned the huge tightening in credit spreads seen since the rescue of Bear Stearns <BSC.N> in mid-March had overrun, with the Europe index tightening by over 100 basis points and the Crossover index breaking back below 400 basis points, albeit briefly.

The hunt is now on for signs of economic disruption in the wake of the financial system crisis.

Strategists at BNP Paribas said on Friday the U.S. Federal Reserve's senior loan officer survey this week and the increase in the type of collateral it would accept in liquidity facilities showed this was happening.

"The message is very clear that we are now entering the next phase of the credit crunch as credit is increasingly being rationed to the real economy by the financial system," they wrote in a note to clients.

"The recent underperformance of non-financials versus financials and a drop in earnings and earnings expectations is evidence that the market is moving away from systemic risk to single-name credit risk."

Adding to that picture, the European Central Bank said on Friday euro zone banks were making it harder for companies and households to borrow money. [ID:nL09409883].

However, the primary corporate bond market this week saw continued good activity, although the U.S. market dominated as drugmaker GlaxoSmithKline <GSK.L> issued $9 billion of debt there, drawing nearly $18 billion of orders.

Analysts said the good demand for new issues was reassuring and showed that despite the widening in credit derivatives spreads, investors still had appetite for corporate debt. (Reporting by Richard Barley; editing by Sue Thomas)

((richard.barley@reuters.com; +44 20 7542 7770; Reuters Messaging rm://richard.barley.reuters.com@reuters.net))

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Keywords: MARKETS BONDS EUROCORP