Convertibles quiet amid equity sell-off; Yahoo! resilient in risk-off trade; Medicines up

By Rebecca Melvin

New York, Sept. 1 – Trading of U.S. convertibles was muted on Tuesday as summer doldrums continued amid a steep sell-off in equities.

“Convertibles were remarkably quiet given what is happening in the broader markets,” a New York-based trader said during the session.

Convertibles held in and many higher-grade credit names actually expanded in a flight-to-quality trade, a Connecticut-based trader said.

U.S. stock markets dropped straight down at the open and closed near their session lows for the first session of September. The S&P 500 stock index closed down 58 points, or 3%, at 1,913.85.

The sell-off – which hit international stock markets as well – came on the heels of economic data out of China that showed weaker manufacturing activity than expected.

Convertibles energy names also remained quiet despite a steep drop in oil prices.

About the only convertible bond trading notably was Yahoo! Inc.’s 0% convertibles, which were flat to higher on an outright basis, but better on swap, as the common stock of the Sunnyvale, Calif.-based internet company moved lower. The Yahoo! convertibles also traded actively on Monday.

Another name that was trading well in a continuation of Monday’s action was Medicines Co., and that company’s two convertible bonds extended swap gains. The bonds jumped on Monday on both an outright basis and on swap after news of a positive early study for the Parsippany, N.J.-based health care company’s cholesterol drug.

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