Morning Commentary: Convertibles players eye tranquil markets; energy quiet as oil prices rebound

By Rebecca Melvin

New York, Aug. 23 – U.S. convertibles were quiet early Tuesday as the dog days of summer drag on.

Any trading that does occur in convertibles doesn’t normally materialize until later in the session, a New York-based trader said.

“We routinely have stocks move but no transactions in the convert until later in the day,” the trader said.

Meanwhile the broader markets were calm with the major equity indices fractionally higher, continuing their slow grind higher as rates look to remain lower for longer. The Chicago Board of Options Exchange VIX, which measures the potential for volatility, was lower by about 2.5%.

Some names in the energy sector turned upward as oil prices reversed early losses amid reports that Iran may be willing to cooperate with other producers that are seeking to freeze output. Crude oil prices were up more than 1% after a Reuters news report on Iran’s potential cooperation, and reversed earlier losses of more than 1%.

West Texas intermediate crude oil for October delivery rose 60 cents, or 1.3%, to $48.01 per barrel on the New York Mercantile Exchange after dropping 1.7% earlier.

Chesapeake Energy Corp.’s 2.5% convertibles due 2037 remained untraded and were last at 99.30 while the underlying shares of the Oklahoma City-based oil and gas company rose more than 5% to $6.41.

Meanwhile, the underlying common shares of the Weatherford International Ltd. convertible were still slightly lower but improved from midmorning levels, and the Weatherford 5.875% convertible changed hands off about 0.25 point to 0.5 point at around 113.

Weatherford shares were at $5.71, down 3 cents, or 0.5%.

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