GM debt protection costs hit record

NEW YORK (Reuters) - The cost of insuring the debt of General Motors Corp GM.N against default hit a record high on Monday in the wake of a $15.5 billion quarterly loss reported by the automaker on Friday.

GM's benchmark long bonds were steady, holding close to record lows set on Friday after the automaker reported its second-quarter loss, the third-largest in its 100-year history.

"GM credit spreads continue to be priced on the basis that just about everything will keep going wrong," Glenn Reynolds, senior analyst at fixed-income research service CreditSights, said in a report on Monday.

"The price action has now blown past the Chrysler meltdown of the second half of 1990" and is reminiscent of the bursting of the tech and telecommunications bubble, he said.

GM's five-year credit default swaps rose to 47.5 percent of the sum insured as an upfront payment from 46.5 percent at Friday's close, plus 500 basis points in annual payments, according to Phoenix Partners Group. This means it would cost $4.75 million to insure $10 million in debt for five years, plus $500,000 a year.

GM's benchmark bonds with an 8.375 percent coupon due in 2033 were unchanged at 47.5 cents on the dollar, according to MarketAxess. They had hit an all-time low of 46 cents on Friday.

Its 7.2 percent notes due in 2011 fell to 60.5 cents on the dollar on Monday from 62.25 cents on Friday.

General Motors' quarterly loss came as its North American sales fell 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business.

The plunge in auto bonds took a toll on the high-yield market, which posted a 0.32 percent total return loss on Friday alone, according to data from Merrill Lynch. Overall yields on junk bonds rose to 11.5 percent, the highest since 2003.

"Significant auto sector dislocation could become the catalyst for broader weakness in the high-yield market," Bank of America said in a report.

(Reporting by Dena Aubin; Editing by Kenneth Barry)