Mutual funds eye Cemex, Tesla convertibles; Chesapeake Energy ‘smoked’ as stock weakens

By Stephanie N. Rotondo

Phoenix, April 10 – A convertible bond trader said the space was “pretty quiet” on Friday.

“Volumes are light,” the trader said. “It seems like guys are waiting [for new deals to pick up].”

But the week has seen some notable moves, he added.

Cemex SAB de CV’s 3.25% convertible bonds due 2016, for instance, “popped a little bit this week,” rising as much as a quarter of a point.

The trader pegged the issue at 114 bid, 114.5 offered versus $9.83 in the stock.

“There seems to be a pretty decent-sized hedge fund looking to buy them,” he said.

Some mutual funds have meantime been “putting their trust in Elon Musk,” a trader said, as activity in Tesla Motors Inc.’s convertible debt has picked up. “We are starting to see some outright buying in those.”

Still, the bonds haven’t moved all that much, he remarked, deeming the 1.5% convertible notes due 2018 unchanged and both the 0.25% convertible notes due 2019 and the 1.25% convertible notes due 2021 up “maybe a quarter-point” over the course of the week.

As for the company’s equity, that was up 81 cents to $210.90.

In the convertible preferred arena, the trader said energy names like Chesapeake Energy Corp. have been getting some play. Both tranches of the 5.75% cumulative non-voting convertible preferreds have “gotten smoked on the down move in the stock and what’s going on with oil.”

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