U.S. convertibles softer to start holiday-shortened week; market players trim portfolios

By Rebecca Melvin

New York, Nov. 23 – U.S. convertibles started off the holiday-shortened week on a softer note on Monday. Financial markets are closed on Thursday for Thanksgiving.

“It seems sort of like a hangover from the last couple of weeks, as the weakness in energy and other sectors like solar is spilling over to the broader market,” a New York-based trader said.

Convertibles investors were focused on reducing risk and trimming their portfolios, another trader agreed. There were no particular areas of selling however, they said.

Chesapeake Energy Corp., which has been a drag on the convertibles market recently, was up a little bit on the day.

The Chesapeake 2.5% convertibles due 2037 changed hands at 67.5 from 67 on Friday, according to Trace data. But there was not a lot of volume in the name, a New York-based trader said.

“There’s decent volatility in oil,” the trader said, referencing news headlines regarding Saudi Araba’s pledge to work with other countries to regulate oil prices.

The Saudi statements initially moved oil higher, but then pricing gave back gains amid signs of growing oversupply. West Texas Intermediate crude ended down 15 cents to $41.75 per barrel.

Trina Solar Ltd.’s convertibles were down on Monday after the Changzhou, China-based solar panel maker reported third-quarter earnings that missed estimates ahead of the market open.

Quarterly revenue beat estimates, however, and the solar company raised its guidance for full-year PV module shipments. Trina’s two convertible issues were indicated to have dropped into the upper 80s from the low 90s as shares that fell 6% to $9.11. Trina’s 3.5% convertibles were down to 87.8 from 92.5, and the Trina 4% convertibles fell to about 87.7 from 91, according to a market source.

Iconix Brand Group Inc.’s convertible bond traded actively and was up about a point in tandem with higher shares for the New York-based brand management company. The Iconix 2.75% bond was quoted at 90 bid, 90.25 offered. The stock has been volatile and gained 50 cents, or 7.8%, to $6.90 on Monday.

Overall, things were “a little bit softer,” a trader said. “People are looking to clean stuff up.”

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Iconix Brand Group Inc. Nasdaq: ICON

Trina Solar Ltd. NYSE: TSL

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