Convertibles decouple from equity pricing amid whipsaw action; Whiting Petroleum lower

By Rebecca Melvin

New York, Jan. 14 – Convertibles trading decoupled from equities on Thursday as whipsaw action continued and stocks bounced higher.

Crude oil prices improved, and many names in the energy sector rebounded; nevertheless, some market players were using the better conditions to sell rather than to buy convertible paper.

“We were seeing a lot of trades, and they are not even trading with the stock anymore,” a New York-based trader said.

Whiting Petroleum Corp.’s convertibles traded down despite a 12.5% pop in the underlying shares of the Denver-based oil and gas exploration and production company.

The Whiting 1.25% convertibles due 2020 traded down to 60.625 from about 61.375, a New York-based trader said. That was against shares that rose 75 cents, or 12.5%, to $6.75.

And West Texas Intermediate crude oil for February delivery closed up 65 cents, or 2.1%, on Thursday to $31.13.

The lack of correlation was pretty disappointing, the trader said.

“I don’t think that people are convinced with the stability or that it will make sure these companies can cover their interest obligations,” the trader said.

Nevertheless there was also the expectation that the disassociation would be short lived; and that once a limited number of sell orders cleared, the convertibles would resume tracking equities.

In addition, not all energy names were lower. Chesapeake Energy Corp.’s convertibles were up about a point in thin trade, but still in the mid 50s context.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.