Convertibles quiet in shortened, pre-holiday session; DryShips firms up; Tesla active

By Rebecca Melvin

New York, Dec. 24 - The convertible bond market was mostly quiet on Tuesday as thinly manned trading desks wrapped up business early on Christmas Eve in tandem with other financial markets. Markets will remain closed on Wednesday for Christmas.

Trading volume was exceptionally light, with $20 million of convertibles in total having changed hands as of late morning, according to Trace data. On a normal day, one large issue could trade that much.

DryShips Inc.'s 5% convertibles due 2014 was one issue that did see some decent trading activity on Tuesday and was the only name worth mentioning, a New York-based trader said, when asked about the market.

The DryShips bond was steady to higher with the underlying shares sharply higher in slightly above-average volume for that stock. The Baltic Drybulk shipping index opened higher and was up about 2% on the day.

Tesla Motors Inc. shares were also up 6%, and the Tesla 1.5% convertibles also gained 6 or 7 points, changing hands at 141 compared 134 on Monday. But volume was light, and in view of low liquidity, market moves can be exaggerated, so no trends could be discerned.

The equity markets extended gains in the shortened, pre-holiday session.

The Dow Jones industrial average gained 62.94 points, or 0.5%, to 16,357.55. Last Christmas Eve, the Dow stood at 13,139.08 at the close.

The Standard & Poor's 500 index added 5.33 points, or 0.3%, to 1,833.32, which compares to a Dec. 24, 2012 close of 1,426.66; and the Nasdaq composite index edged up 6.51 points to 4,155.42, compared to last Christmas Eve, when the Nasdaq closed at 3,012.60.

The markets closed at 1 p.m. ET on Christmas Eve Tuesday and will remain closed Wednesday on Christmas Day.

DryShips firms up

DryShips' 5% convertibles due December 2014 traded at levels that were steady to higher than on Monday. They were seen changing hands at about 99.

DryShips shares jumped 24 cents, or 6%, to $4.17.

"The bonds were moving around this morning," a New York-based trader said.

He attributed the activity to "traders shifting things around."

People that go for those really distressed deep dives, once [the bond] gets to 98, they are happy to look for something more juicy with 5, 6, 7, or 8% yield, rather than wait for those last one or two points," the trader said.

DryShips took delivery of a new offshore deepwater drillship Dec. 20, the company announced Monday. The drillship was mobilizing to offshore Angola to begin operations with Total.

Mentioned in this article:

DryShips Inc. Nasdaq: DRYS

Tesla Motors Inc. Nasdaq: TSLA

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