Morning Commentary: Upcoming holiday, short week weigh on convertibles trading; Chesapeake firms

By Stephanie N. Rotondo

Seattle, Nov. 21 – As the market prepared for a short week due to Thanksgiving, the convertible debt space was seeing limited liquidity, a trader said early Monday.

“The whole week is going to be like that,” he said, adding that at mid-morning, total trading volume was just $90 million.

Chesapeake Energy Corp. was one of the day’s more active names, as oil prices surged on hopes OPEC could reach a production freeze agreement next week in Vienna.

The 5.5% convertible senior notes due 2026 started the day at 98.125, according to one New York-based sellsider. By mid-morning, the paper was trading “with a 99 handle,” the trader said.

“So that’s up a point,” he said.

Chesapeake’s common shares (NYSE: CHK) were meantime up 33 cents, or 5.33%, at $6.26.

The trader said the gains came amid oil’s “Charlie Brown rally.

“We’ve seen the same headlines” before, he noted. Each time an OPEC member-country – or Russia, which is not a member but has been involved in the production cut talks – says that a deal is in sight, “they take [oil] up, and every time, nothing ever happens.”

Russia has said that it sees no obstacle to the output agreement, and last week, OPEC offered Iran a deal to cap production but not freeze it.

Iran has been a holdout, given that it is still trying to ramp up production to pre-sanction levels.

For its part, optimism regarding a deal boosted domestic crude oil by 3.45% in early trading.

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