Oct. 31 (Bloomberg) -- Investors should buy the bonds of Ford Motor Co. and cement maker Lafarge SA in “pair trades” of U.S. and European credits, according to Morgan Stanley analysts.
The analysts recommended investors add Ford’s $1.1 billion 12 percent notes and cash in Peugeot SA’s 8.375 percent bonds maturing in 2014. Investors should also sell Vulcan Materials Co.’s 6.4 percent notes due 2017 in order to buy the 7.625 percent issue of Paris-based Lafarge, the world’s biggest cement producer, strategists led by London-based Andrew Sheets wrote in a research note on Oct. 28.
Ford, the second-largest U.S. automaker, has “lower leverage and exposure to a reasonably strong auto market at home while Peugeot relies on western Europe for 73 percent of its sales where the risk of recession is higher,” according to Morgan Stanley analysts.
Ford’s bonds are quoted at 398 basis points more than U.S. Treasuries while Peugeot’s notes are at 425 basis points more than government debt, according to Bloomberg Bond Trader. A basis point is 0.01 percentage point.
Lafarge’s bonds are quoted at 129 basis points per turn of leverage, compared with 63 basis points on the bonds of Birmingham, Alabama-based Vulcan, which makes concrete and asphalt mix.
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