NEW YORK (Bloomberg) — General Motors Corp. bonds tumbled on concern that President Barack Obama will let the biggest U.S. automaker file for bankruptcy.

GM's $500 million of 7.7 percent notes due in 2016 fell 8.8 cents to 10.4 cents on the dollar as of 9.45 a.m. in New York yesterday, a record low, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 79.7 percent, or 77 percentage points more than similar-maturity Treasuries, Trace data show.

Obama believes a quick, negotiated bankruptcy is the most likely way for Detroit-based GM to restructure and become a competitive automaker, according to people familiar with the matter. The president gave GM 60 days to come up with deeper cost and debt reductions than proposed in its recovery plan submitted last month.

"Everybody believes they're going to file," said Arthur Tetyevsky, chief fixed-income strategist at CF Global Trading UK Ltd. in New York. The bonds are down because of "the looming probability of bankruptcy".

As part of the restructuring, GM must shrink $27.5 billion in debt by getting bondholders to swap their claims for equity. Bondholders doubt a debt exchange will succeed outside of bankruptcy because there isn't enough time under the administration's deadline, according to a person familiar with the thinking of the committee representing creditors who declined to be named because the discussions are private.

The cost to protect against a GM default for five years matched a record high. Credit-default swaps on GM rose one percentage point to 86 percent upfront.