Merrill analyst: Convertible market value lost 4% in July on slack new-issue flow, market downturn

By Ronda Fears

Nashville, Aug. 2 - Merrill Lynch convertible analyst Tatyana Hube noted in a report Monday that the total market value of the convertible universe dropped by 4%, or by $11.8 billion, to $299.6 billion at the end of July from $287.8 billion at the end of June.

The analyst said the decline was driven by the secondary market's downward slide and the primary market's negative net new issuance of $2.8 billion during July.

There was considerable conversion premium expansion, she added, as stocks dropped faster and more pronounced than convertibles. The average conversion premium of the Merrill convertibles index increased to 48.9% at the end of July from 45% at the end of June. At the same time, the average investment value premium declined 36.9% to 32.4% during the month.

The average discount to theoretical for the index rose slightly to 0.33% cheap from 0.28% cheap, as investors revised valuations downward in the marketplace.

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