Volume was light last week, say traders, but several beaten up names got a lift, including Qwest Communicationsand Paxson Communications.The cable sector also turned in a decent week.
Nextel Gives Market A Lift
Nextel Communications gave the market the best news it has had in some time with an extremely positive earnings call last Tuesday, which traders described with strongly- worded adjectives such as "heroic." The 9.375% notes of '09 (B3/B) went as high as 72, before settling at 68 by Thursday afternoon. They started the week at 59.5. Other wireless bonds also got a lift on the news. The Airgate PCS 13.5% notes of '09 (Caa1/CCC) were up four points to 28.
Tom Parker, portfolio manager at Barclays Global Investors in San Francisco, says Nextel did a much better than expected job of reducing debt. "It's been a long time since there's been good news on a bond everybody owns. It really helps create a positive tone for the whole market," he says.
Merchant Energy Woes Continue
Bonds of merchant energy companies were lower last week following news that Duke Energy, an investment-grade credit that many believed would stay free from scandal, engaged in round-trip trades to artificially boost trading volumes.
Calpine Corp.'s 8.5% notes of '11 (B1/B) fell five points to 56-8 through Thursday. AES Corp.'s 9.375% of '10 were down six points to 53 and CMS Energy's 8.5% notes of '11 (B3/BB) dropped 2.5 points to 73.
The troubles in the sector even hit the bonds of Mirant Corp. One portfolio manager believes they should have received a lift from the company's announcement on Tuesday that Mirant would sell a Wisconsin power plant for $109 million. Mirant's 8.30% notes of '11 were down six points on the week to a 67 bid.
Deathcare Co. Bonds Drop As COO Resigns
Service Corp. International saw its 6% notes of '05 (B1/BB-) drop nearly two points to a bid of 88 after the unexplained resignation of Jerald Pullins, coo of the funeral services provider. A successor has been chosen from within the firm.
Chris Bauders, analyst at Raymond James & Co., says the bonds are money good. "I recommend the bonds on a spread basis. They provide good value for investors looking for yield in a defensive, recession-resistant business," he says. He notes that Service Corp. has been paying down debt significantly through the use of foreign asset sales and recurring free cash flow.