Morning Commentary: Convertibles secondary quiet and flat; Duke comes in with stock

By Abigail W. Adams

Portland, Me., April 14 – The convertibles secondary space was quiet and flat on Friday with equities lower and activity surrounding new paper tempering.

The primary market saw a smattering of activity over the week with Mirum Pharmaceuticals Inc.’s $275 million offering of 4% convertible notes due 2029 and Guess?, Inc.’s $275 million issue of 3.75% convertible notes due 2028, which were priced as part of a privately negotiated exchange.

While the notes were not on the tape early Friday, they both saw strong starts in the aftermarket.

Mirum Pharmaceuticals’ 4% notes traded as high as 108 on their aftermarket debut on Thursday and expanded 2.5 points to 3 points on a dollar-neutral, or hedged, basis.

While Guess?’s 3.75% convertible notes were not on Trace for the majority of Thursday’s session, there was a flurry of late-day prints with the notes trading as high as 103.75 outright and expanding 2 points to 2.25 points on swap, a source said.

Primary activity is expected to remain muted as earnings season commences; however, some smaller wall-crossed offerings are expected.

With little activity surrounding recent issues, volume was thin in the secondary space with equities stalling after the strong gains of the previous session.

The Dow Jones industrial average was down 208 points, or 0.61%, the S&P 500 index was down 0.39%, the Nasdaq Composite index was off 0.61% and the Russell 2000 index was 0.32% lower shortly before 11 a.m. ET.

There was $60 million in reported convertibles trading volume about one hour into the session with little price movement among the names that did trade.

Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) continued to dominate the tape with the notes lower outright in line with stock, a source said.

The 4.125% notes were down about 0.375 point outright to trade at 101.625 early in the session.

Duke’s stock was changing hands at $97.85, a decrease of 1.30%, shortly before 11 a.m. ET.

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