Morning Commentary: Chesapeake extends gains; Toll Brothers untraded despite higher shares

By Rebecca Melvin

New York, May 24 – U.S. convertibles remained quiet early Tuesday despite higher shares as light volume amid low issuance persists, a convertibles sellsider said.

The market was also exceedingly quiet on Monday, but activity often picks up on Tuesday. “There’s a mix of activity, but it’s very quiet. People are trading around their book, but that’s about it,” the sellsider said Tuesday.

A pair of Chesapeake Energy Corp.’s convertible bonds, which have been the epicenter of energy sector trading, remained busy and better on Tuesday. Driving that move is the fact that the company is buying back the bonds.

The Chesapeake 2.5% convertibles traded at 92.5 bid, 93.5 offered, which was up from about 91.5 to 92.5 on Monday.

The Chesapeake 2.25% convertibles due 2038 traded last at 68.66, which was up from a late-Monday trade at 67.

Chesapeake shares were up 29 cents, or 8%, to $3.95.

Also in the energy patch, Cheniere Energy Inc. was trading well Tuesday morning. The bonds were trading around 57 amid hedge fund selling and outright buying. The pricing was in line with the underlying shares, which were down 25 cents, or 0.7%, at $32.95.

Elsewhere, Toll Brothers Finance Corp.’s convertibles were quiet despite a jump in the underlying shares of the Horsham, Pa.-based residential home builder. The company posted an earnings beat and also better-than-expected new home sales data was released.

The Toll Brothers 0.5% exchangeable senior notes due 2032 were untraded on Tuesday and were last at 97.62, according to Trace data.

Toll Brothers shares were up $1.77, or 6.5%, at $28.90.

For its second quarter, Toll Brothers earned $89.1 million, or 51 cents per share, on $1.12 billion in revenue for its just completed quarter. That compared to earnings of $67.9 million, or 37 cents per share, in the year-earlier period. Analysts were expecting earnings of 46 cents per share on $1.04 billion of revenue.

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