Convertibles follow equities, oil lower after firmer start; Cobalt down; Iconix better bid

By Rebecca Melvin

New York, Jan. 12 – U.S. convertibles players turned sellers in afternoon trading on Tuesday in a turnaround that tracked equities and crude oil prices lower. Volume was pretty light, however, market sources said.

“This morning it seemed well bid for, but things have faded over the afternoon,” a New York-based trader said of the convertibles market.

The catalyst that brought equities down appeared to be a renewed sell-off in crude oil.

“Oil is breaking $30 [per barrel] as we speak. I don’t know what triggered oil to sell off, but as oil sold off, equities sold off, and convertibles eventually followed suit,” the trader said.

West Texas Intermediate crude oil for February delivery breached $30.00 per barrel intraday but ended above that mark and was last at $30.53 per barrel, which was down 88 cents, or 2.8% on the day. Meanwhile, equities staged a late-session rally.

Cobalt International Energy Inc.’s convertible bonds, which were quiet in the morning, succumbed to the weight of weaker oil and slipped as shares of the Houston-based oil-focused exploration and production company fell 7%. That move was on top of an 8% move down on Monday.

Elsewhere, a bid resumed in Iconix Brand Group Inc.’s 2.5% convertible bonds, although pricing was little changed, after a report that Advent Capital Management LLC has suggested refinancing the 2.5% convertibles and volunteered to participate if the company did a deal, market sources said.

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