Distressed debt weaker on falling crude prices, Fed decision; oil retreats; AK Steel gains

By Stephanie N. Rotondo

Phoenix, Sept. 18 – The distressed bond market was negative as the week came to a close, driven in large part by a hefty decline in crude oil prices.

On Thursday, the Federal Reserve decided to keep short-term interest rates steady for the time being, citing global economic concerns and recent volatility in domestic markets. The uncertainty then leaked into the broader markets, including commodities.

Oil prices also took a hit, given the Fed’s concern about the global markets – which could put even more pressure on oil demand.

Domestic crude prices dropped 4.26% in Friday trading, even as new data showed that active U.S. drilling rigs had declined for the third week in a row.

The decline of the commodity then put pressure on oil and gas names, which have already been struggling amid the weak price environment.

AK Steel Holding Corp. managed to buck the day’s trend, ending with a firmer tone after the company upwardly revised its third-quarter outlook.

The name “rebounded,” a trader said.

But while AK Steel bonds were better on the day, optimism about the name might have been somewhat dampened by comments from U.S. Steel Corp.’s top executive regarding the state of the steel market.

In an interview with Fox Business Network on Friday, Mario Longhi, chief executive of U.S. Steel, said that the U.S. steel industry is “under severe attack.

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