Convertibles gain in well-bid market; Cobalt improves, but oil slides; Cemex, Fiat up

By Rebecca Melvin

New York, Dec. 18 – U.S. convertibles improved across the board on Thursday, albeit in quiet trade, strengthening in tandem with higher shares and better credit. But oil prices, which started out better, resumed their slide intraday.

Some energy convertibles were stronger for a second straight day. Cobalt International Energy Inc.’s convertibles rose and were said to have recouped about 0.5 point to 0.75 point on swap as shares of the Houston-based oil and gas exploration and production company rose 1.8%.

Energy XXI Ltd. pared some of its early gains but was still positive for a second straight day, despite a retrenchment in the underlying shares of the Houston-based oil and gas E&P company.

The convertibles of Cemex SAB de CV traded up in tandem with higher shares of the Monterrey, Mexico-based cement producer.

The sister Cemex convertible issues were “all better to buy,” a New York-based trader said, indicating that there was a strong bid for the paper but not necessarily a lot of offers.

The trader said that his firm hadn’t traded any E&P names, but there was a “hodge podge” of issues in various sectors that were better bid.

“More people are adding risk,” he said.

Elsewhere, Fiat Chrysler Automobiles NV’s mandatory convertible traded up amid a strong bid, as shares added, but closed off their highs for a fractional gain.

Internationally, Alcatel-Lucent SA’s euro-denominated convertibles climbed as shares rose 8% following a report that the telecommunications equipment maker has revived talks about a possible merger with Nokia Networks.

U.S. equities rallied for a second straight day after the Federal Reserve said it will be patient about raising interest rates, which reassured markets that the central bank is considering the challenges that low oil prices and emerging market turmoil pose to the U.S. economy.

Cobalt expands

Cobalt’s 2.625% convertibles traded at 62 to 63 in the early going, which was up from 60 to 61 on Wednesday and 58 to 60 previously, according to Trace data.

The Cobalt 2.625% convertibles had slumped to 56 on Dec. 15 from 72.5 on Nov. 21. Their high mark for the year was 97, set in early March.

Cobalt’s 3.125% convertibles traded around 67, which was firmer from a trade at 66 on Wednesday and up from 62 to 63 previously, according to Trace.

The Cobalt 3.125% convertible slumped to 61 on Dec. 8, down from 77.5 on Nov. 21. In July, the 3.125% convertibles were over par.

Energy XXI’s 3% convertibles due 2018 traded up to 29 in the early going but pulled back to the 28 range and ended the day at 28.25 as Energy XXI shares slipped 14 cents, or 4%, to $3.09.

Energy XXI’s convertibles were trading at 29 early Thursday, which was up from 27 on Wednesday and 24 on Tuesday.

Cemex, Fiat trade up

Cemex’s 4.875% convertibles due 2015 were last seen at 105.75, which was up a couple of points from previous trades on an outright basis, as shares traded up by 58 cents, or 5.7%, to $10.85.

Cemex’s 3.25% convertibles due 2016 were last at 120.125, and the Cemex 3.75% convertibles due 2018 were last at 125. Both issues were up 4 or 5 points on the day, according to Trace data.

A trader queried said he wasn’t sure why the convertibles and shares of the cement maker were up but chalked it up to a willingness among investors to take on more risk.

Fiat’s mandatory convertibles also gained. They were quoted at 104.25 near the end of the session. They were also seen at 104.875, and they were said to have expanded on a swap basis by about 0.75 point.

Mentioned in this article:

Alcatel-Lucent SA NYSE: ALU

Cemex SAB de CV NYSE: CX

Cobalt International Energy Inc. NYSE: CIE

Energy XXI Ltd. Nasdaq: EXXI

Fiat Chrysler Automobiles NC NYSE: FCAU

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