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Morning Commentary: Market opens weaker; energy spreads top 1,000 bps; CGG down 20 points
By Paul A. Harris
Portland, Ore., Dec. 15 – Cash bonds started the week unchanged to slightly weaker, according to a trader on the East coast of the United States, who described Monday morning trading volume as moderate.
The energy sector of the BofA Merrill Lynch US High Yield Master II Option-Adjusted Spread index was officially in distressed territory, at a 1,002 basis points spread to Treasuries, the source added, noting that the average spread of the index was 571 bps.
The next widest spread is that of the industrial sector at 565 bps, which lends some perspective on the weight that the energy sector exerts upon the index, the trader said.
The tightest spread in the index is that of the health care sector, at 370 bps.
Oil rallies, then slips
Oil continued to slide as a slight overnight rally faded into the New York morning, according to the trader, who spotted the West Texas Intermediate barrel price at $57.20.
Once traders in the United States took their seats, the price started heading lower, the source said.
High-yield energy names remained under pressure.
The California Resources Corp. 6% senior notes due Nov. 15, 2024 were trading in a context of 82 bid, 83 offered on Monday, after spending much of the latter part of last week in an 82½ bid, 83½ offered context, the trader said.
However the California Resources 6% paper was higher than the 81¼ bid, 82¼ offered lows that an investor spotted on Friday.
CGG falls on withdrawn bid
Dollar-denominated bonds of the French seismic services provider to the energy industry, CGG, dropped by as much as 20 points on news that Technip decided not to go forward with plans to acquire the company.
Focus on the buyout saw the dollar-denominated CGG paper trade to the mid-90s from the low 80s, the trader recounted.
However on news that Technip walked away from the deal the CGG bonds are trading in the mid-70s, in active trading.
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