GM is expected to reveal today a deficit of $1 billion (£525 million) from its automotive business, the worst quarterly result since 1992.

Bond investors are worried that any unexpected bad news could tip its already shaky credit rating to junk status.

Ford, whose first quarter figures are due tomorrow, has already signalled its weaker prospects, with its profitability squeezed by higher steel prices and the increasing discounts on its cars. Both firms are shouldering the cost of hundreds of billions of dollars in borrowings and the burden of massive pension and healthcare liabilities.

Concern that GM might be forced to file for bankruptcy, which was denied by the company, triggered a bout of heavy selling of its bonds last week. Bonds issued by the carmaker, which boasts famous US brands such as Cadillac, Buick and Pontiac, have been under pressure. Credit analysts at Standard & Poor’s rate GM’s long-term bonds BBB-, the lowest investment grade and last month the agency gave warning that the rating was “tenuous” after GM gave warning of a large quarterly net loss and cash outflow.

GM’s benchmark eurobond is now trading at extraordinary yields above 11 per cent, levels that bond analysts would attribute to a company that was heading for insolvency. However, Standard & Poor’s is sanguine about the risk of a GM default, noting that the company has ample cash resources in the near term.

According to Jim Reid, of Deutsche Bank, the spread on GM’s bonds has more to do with the scale of the company’s borrowings and the lack of capacity in the market to absorb high-yielding debt.

“The sort of company that trades at these levels don’t normally have a lot of borrowings. But GM is the second largest company in terms of outstanding debt,” Mr Reid said.

A relegation of its debt to junk status could trigger a further selloff with a limited supply of buyers able to absorb a large expansion in the junk bond market.

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