US Corp bonds - Spreads wider on profit-taking

By Dena Aubin

NEW YORK, June 24 (Reuters) - U.S. corporate bond yield spreads widened on Tuesday as the market braced for a $13 billion bond sale from General Motors Corp., while some investors cashed in after a strong rally in corporate debt.

"There's some supply pressure from General Motors and profit-taking similar to what we've seen in the stock market the last couple of days," said one corporate bond trader.

Spreads, the extra yields that corporate bonds pay over Treasuries, widened by about 0.02 to 0.03 percentage point overall, traders said. Spreads in the auto sector tightened, however, after two sessions of widening under the weight of GM's upcoming supply.

General Motors Acceptance Corp.'s 6.875 percent notes due in 2012 traded at 3.51 percentage points more than Treasuries, about 0.05 percentage point narrower than Monday, according to MarketAxess.

GM's sale is expected to include about $10 billion from the automaker itself and $3 billion from its finance unit, General Motors Acceptance Corp.

In the government market, benchmark Treasury 10-year notes fell 5/32, yielding 3.33 percent, as investors took profits after a modest rally on Monday.

The markets are awaiting the outcome of the Federal Reserve's two-day monetary policy meeting starting on Tuesday. The Fed is widely expected to cut interest rates for a 13th time since January 2001, although corporate bond strategists warned that a cut may do little to spark a long-awaited revival of capital spending.

"Corporations are still mired in restructuring issues and have a myriad of competitive challenges that remain higher on their priority list than the hunt for new investment opportunities," fixed-income research service CreditSights said in a report on Tuesday. "Along with the ability to borrow, the desire to invest also needs to be fostered for business to come to the party and add their muscle to the economic growth engine."

To see other upcoming and recent sales, click on [nNEUBD4].