Convertibles weaken further amid market turmoil; Lukoil drops; technology names lower

By Rebecca Melvin

New York, Dec. 16 – U.S. convertibles were palpably weaker Tuesday, hurt by seemingly indiscriminate selling as investors attempted to reduce absolute risk heading into year-end and to shore up capital.

Market players were “trying to sell anything,” a New York-based trader said, but bids were scarce and low liquidity characterized the session.

Given the light volume, it was difficult to gauge how hard hit convertibles were,” a second New York-based trader said.

Credit markets were weak overall amid an ongoing slide in oil prices and Russia’s tumbling ruble and sudden interest rate hike, which sent reverberations through the markets.

Convertible “bonds are down 1 point delta neutral. It’s finally seeped into all sectors instead of being contained in oil and E&P companies,” a trader said.

Red Hat Inc.’s 0.25% convertibles due 2019 fell to 106.75 versus a share price of $58.23 at the close, which was down about a point on a dollar-neutral basis.

Priceline Group Inc.’s newer 0.9% convertibles were quoted at 92.75 bid, 93.125 offered at the close, which was down 0.5 point on swap.

Twitter Inc. was also very “heavy.”

The weakness was attributed to “a combination of a lot of things,” as macroeconomic concerns met with technical factors.

There was also a continuation of trades in Monday’s headline names, including American Realty Capital Properties Inc. and Isis Pharmaceuticals Inc.

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