GE Bonds Rebound as Bargain Hunters Swoop In

GE Bonds Rebound as Bargain Hunters Swoop In https://images.wsj.net/im-38919/social

GE Bonds Rebound as Bargain Hunters Swoop In

General Electric
Co.



GE -0.34%




bonds rebounded sharply in recent days, easing some of the losses debt investors have taken as doubts about the conglomerate’s financial stability spread through financial markets.

GE Capital’s frequently traded bonds due 2035 have rallied 6% since Nov. 21 to 82 cents on the dollar but are still well below the 90.57 cents they traded at in late October, according to MarketAxess.

The cost of protecting against a default on GE bonds for five years through credit-default swaps, which falls as investor confidence rises, has declined about 24% in recent days to $202,500 annually, according to






IHS Markit
.

Bond prices have recovered, in part, because selling abated from large institutions and funds with restrictions on holding junk-rated debt, which unloaded billions of dollars of securities in mid-November, investors said.

Credit-rating firms rate GE three notches above junk, but unexpected losses at its power unit and the prospect of charges from its insurance business have fanned fears of further downgrades.

As the selling slowed, fund managers who think GE will remain investment grade for at least several years started buying the debt at what they consider to be bargain levels, the investors said.

“We believe another three notches of downgrades has a low probability of occurring and would require an inability to stabilize the power business,”






Barclays



PLC wrote in a research report published last week.

Buying also came from short sellers who moved to take profits as prices began to rise. Short sellers borrow securities and sell them with plans to repurchase the instruments at lower prices in the future to close out the trade, pocketing the difference.

GE’s 5% preferred shares, a debtlike instrument shorted by many hedge funds, jumped about 11% over the past week to 81.5 cents on the dollar, according to MarketAxess.

The company could shore up its debt prices further by prepaying $2 billion to $4 billion of bonds that fall due in 2019 and 2020, Barclays said in its report.

Write to Matt Wirz at matthieu.wirz@wsj.com

.

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