Distressed debt lifted with equities as GDP grows; crude gains boosts sector; Peabody soft

By Stephanie N. Rotondo

Phoenix, Aug. 27 – Distressed bonds were “pretty strong across the board” as the equity markets rallied again.

Stocks were swinging higher after the Commerce Department reported a 3.7% GDP gain in the second quarter.

The GDP growth exceeded estimates of 2.3%. As the markets improved on the news, so did crude oil prices, which shot up to over $40 a barrel in early trading. Prices for the commodity were further pushed up after data showed a drawdown of inventory at the Cushing, Okla. delivery point.

News that China was selling some of its U.S. Treasury holdings in order to raise dollars to support the yuan was also helping the markets, as the effort seemed to put investors at ease.

With the gains in oil, oil and gas names were busy and better on the day.

A trader said California Resources Corp.’s $2.25 billion of 6% notes due 2024 traded up big “on the rebound in oil.”

Most oil and gas bonds were also firming during trading, though not nearly as much as the CalRes issue. That paper tends to move more, given the size of the issue.

But away from that space, Peabody Energy Corp. debt was active and mostly weaker as investors reacted to news regarding the hiring of restructuring advisors.

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