Morning Commentary: Convertibles strengthen in well-bid market; energy names recoup some losses

By Rebecca Melvin

New York, Dec. 18 – U.S. convertibles were revving up across the board early Thursday, strengthening in tandem with higher shares, better credit and mostly higher oil prices, and following weakness that stretched throughout much of the previous week.

Energy names were stronger for a second straight day.

Cobalt International Energy Inc.’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 Ltd. clawed back for a second straight day, trading at 29 early Thursday, which was up from 27 on Wednesday and 24 on Tuesday.

Energy XXI shares were up another 3% to $3.34 after surging 24% on Wednesday.

Meanwhile, stock indices were up more than 1%, and oil was last fractionally higher at $57.84 per barrel for West Texas Intermediate crude.

The gains continue moves made Wednesday after the Federal Reserve said it will be patient about raising interest rates, reassuring markets that were nervous about the challenges that low oil prices and emerging markets pose to the U.S. economy.

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