Morning Commentary: Liquidity picks up; Newmont trades at premium to parity; Chesapeake busy

By Stephanie N. Rotondo

Seattle, Dec. 20 – Trading in the convertible bond market remained lower than usual early Tuesday but was better than that seen on Monday, a trader said.

As of mid-morning, a total of $69 million of bonds had traded, according to the trader. That compared to $33 million traded as of the same time on Monday.

Newmont Mining Corp.’s 1.625% convertible notes coming due July 15, 2017 were on the active side, trading with a 101 handle, a trader said.

However, the trader added that parity was 69, meaning the issue is trading at a negative yield to maturity.

“That makes no sense,” he said. “Unless somebody is trying to add investment-grade paper to their portfolio, it makes no sense.”

As for the underlying equity (NYSE: NEM), it was down 48 cents, or 1.51%, at $31.28.

Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 were also somewhat busy.

A trader quoted the bonds at 111.375 bid, 111.75 offered.

The stock (NYSE: CHK) was up 3 cents at $7.34.

The above-par levels are due in part to rising oil prices. But a trader noted that the name also became “more attractive” in the wake of the various debt exchanges the company has done this year.

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