Energy names lead the way as battered market rebounds, but fund flows stay negative

By Paul Deckelman and Paul A. Harris

New York, Dec. 17 – After having been beaten to a pulp over the previous week, the junk bond market posted strong gains on Wednesday.

The comeback was led by the oil and natural gas sector, which has recently been battered and beleaguered in line with sliding world crude oil prices. With those crude prices also coming off their recent bottoms on Wednesday, sector names such as California Resources Corp., Sand Ridge Energy, Inc., Halcon Resources Corp. and Meg Energy Corp. – the latter a Canadian oil sands energy producer – were among the big gainers on the day.

One sector name not seen bouncing back, though, was Forest Oil Corp., whose bonds had plunged more than 30 points on Tuesday on the news that the company – which was in the process of being merged with and into Sabine Oil & Gas LLC – would not be doing a change-of-control buyback of that paper.

Market sources in both the primary and the secondary realms meantime noted the heavy withdrawals of investor cash from high-yield mutual funds and exchange-traded funds over the past few days and were predicting that official fund-flow numbers due out Thursday from the major tracking services – a key barometer of overall Junkbondland liquidity trends – would likely show big outflows for the latest reporting week.

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