Two ugly views of the energy debt markets

The impact of low energy prices is rippling through the debt markets for bonds issued by energy related companies.  The S&P 500 Bond Index has returned a modestly negative total return of -0.31% year-to-date while the energy bond sector tracked in the S&P 500 Energy Corporate Bond Index is down 5.79% year-to-date.

Table 1: Select Sector Indices from the S&P 500 Bond Index family:

500 bond sectors 12 2015

The credit default market also has reacted.  The cost of buying default protection on the debt of the 10 entities in the S&P/ISDA CDS U.S. Energy Select 10 Index has shot upward by over 150% since May 1st 2015 from 213bps to end December 3rd 2015 at 539bps.  This could be an indication that market participants are expecting more downward pressure for this sector over the near term.

Chart 1: Select S&P/ISDA U.S. CDS Indices

Energy CDS 12 2015

Table 2: The 10 entities in the S&P/ISDA U.S. Energy Select 10 Index as of December 3rd 2015:

 Anadarko Petroleum Corp.
Apache Corp
Chesapeake Energy Corp.
ConocoPhillips
Devon Energy Corporation
Halliburton Company
Kinder Morgan Energy Partners LP
Peabody Energy Corporation
Valero Energy Corp.
Williams Companies, Inc./The

 

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