Distressed oil bonds shake off crude drop, volatility; Peabody rises; Fannie, Freddie fade

By Stephanie N. Rotondo

Phoenix, Sept. 1 – Volatility remained in the market as September started, waging war yet again on equities and oil prices.

As for the distressed debt space, a trader said Tuesday’s market “had a very heavy feel to it, but not a lot of stuff was trading down.”

The trader noted that oil did “an about-face,” with domestic crude dropping nearly 9% on the day. The declines came amid continued concerns about China, as a U.S. manufacturing report that showed a contraction in August.

Surprisingly, several distressed oil and gas names actually saw their bonds rising despite the oil slide.

“I don’t know how these energy names are up,” one trader said.

Another trader opined that short-covering could be pushing prices higher.

Coal producer Peabody Energy Corp. was also seen moving up in an otherwise weak day.

There was no fresh news to help give the debt a boost, though a trader noted that the company’s stock “had been running [up] for awhile, but they gave back some today.”

Fannie Mae and Freddie Mac preferreds “pulled back,” according to a trader.

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