Convertibles heavy as sellers emerge; SanDisk mostly better on hedge after disappointing outlook

By Rebecca Melvin

New York, July 17 – U.S. convertibles felt “heavy” on Thursday as sellers emerged in the face of lower equities following news that a Malaysian Airlines civilian plane was shot down by a missile near the Russia-Ukraine border, killing all 295 passengers aboard.

Also roiling the markets on Thursday was news in the afternoon that Israeli prime minister Benjamin Netanyahu has instructed his military to begin a ground offensive in Gaza.

“Convertibles feel heavy right now,” a New York-based trader said. The trader said that the impulse to sell convertibles was related to selling in equity markets.

“Things are for sale mostly in the healthcare and tech” sectors, the trader said. WebMD Health Corp. was a good example of a name that felt heavier. “It has three tranches and they are all for sale,” the trader said.

A second New York-based convertibles trader said: “I can’t believe that anyone is in favor of a plane being shot down. But I think the market will kind of reverse; we’ll see the equity market come back in a day or two.”

As for trading before the plane crash, SanDisk Corp.’s convertible bonds fell on an outright basis along with a 14% slide in the underlying shares, but they traded mostly better on a dollar-neutral, or hedged, basis after the Milpitas, Calif.-based data storage company released lower guidance for the current quarter.

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