Convertibles see sharp reversal from early gains; Whiting Petroleum had added a point

Rebecca Melvin

New York, Aug. 25 – U.S. convertibles tried to bounce back in the early going on Tuesday, in tandem with a move in equities, and there were pockets of strength particularly in the technology sector and some China names. But most of those gains fizzled as the broader markets retraced gains in the final hours of trade to end lower again.

“Early on, it was better to buy,” a New York-based trader said.

Whiting Petroleum Corp.’s 1.75% convertibles were up about a point on a dollar-neutral, or hedged, basis, at 77, for example.

“That’s a good benchmark to gauge the market,” the trader said of the Denver-based oil and gas company. A few technology names also improved, including Yahoo! Inc., Intel Corp. and Nvidia Corp.

But those early moves ended up being inconsequential given what happened at the end of the day, the trader said.

“The last hour wiped everything out when the market just rolled over. And you can assume that it’s going to open weaker in the morning,” the trader said.

Still, many convertibles were quiet at the end of the day.

After lunch, the market started to sell off again, and the S&P 500 ended down another 25.60 points, or 1.4%, at 1,867.61. The Dow Jones industrial average lost 204.91 points, or 1.3%, to 15,665.44 and the Nasdaq Composite index fell 19.76 points, or 0.4%, to 4,506.49.

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