Distressed bonds pare gains, still firm for day; crude oil gains boost sector; Linn mixed

By Stephanie N. Rotondo

Phoenix, Aug. 25 – There was a “muted response in the bond world,” a trader said Tuesday, as the broader markets recovered the previous day’s gains – and then lost them all and more.

“The end of the day was not good,” the trader remarked, noting that “lingering concerns” about the global economy – particularly China – remained.

The market’s initial rally came after China’s central bank said it cut its one-year lending rate, a move aimed at bolstering liquidity and supporting the economy. The bank made the decision to cut rates following heavy losses in the Asian markets, which then bled into the global markets on Monday, causing hefty losses in U.S. equities.

A rebound in crude oil prices was also pushing things up. Benchmark crude had dropped over 5% in Monday trading, but finished up over 2% on Tuesday.

As for the distressed debt space specifically, “things were up a good bit,” a trader said, though he added that “bids were definitely fading” by the end of business.

A second trader reported that bid-wanted lists were starting to circulate toward the close.

With the rebound in oil prices, names like Chesapeake Energy Corp. “saw a little rebound with the rest of the oil and gas field,” a trader said.

Linn Energy LLC, however, saw its bonds finishing mixed on news the company’s chief financial officer was stepping down.

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