Convertibles flat in busy, risk-off session; Tesla down outright; Southwestern Energy eyed

By Rebecca Melvin

New York, Jan. 14 – U.S. convertibles traded actively Wednesday and mostly flat, or in line with their underlying shares, as market players – who are recently back in full strength following year-end holidays – employed a variety of strategies in response to a big, risk-off session.

Equities tanked, Treasuries and gold gained, oil whipsawed and convertibles were in line for the most part, although there were exceptions, market sources said.

“Finally, all clients are in and doing things,” a New York-based sellsider said by way of explaining the busy session.

A second sellsider said, “People are flying to safety; they are selling stocks and buying Treasuries.”

“The biggest headline overnight was that commodities are dropping to all-time lows, with oil and metals, and in particular copper, getting hit,” the sellsider said.

In name-specific action, Tesla Motors Inc.’s convertibles traded actively as shares of the Palo Alto, Calif.-based electric car maker were smacked down on news that the company’s fourth-quarter sales in China declined.

The Tesla convertibles were lower on an outright basis, with mixed opinions about how the paper did on hedge.

In the primary market, Southwestern Energy Co.’s $1.3 billion offering of mandatory convertible preferred shares was said to be two to three times oversubscribed, and the approximately $500 million offering of common stock “is approaching deal size,” according to a syndicate source.

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