Morning Commentary: Convertibles secondary off to sleepy start; MicroStrategy lower

By Abigail W. Adams

Portland, Me., April 30 – The convertibles primary market remained dormant and the secondary space anemic early Tuesday with markets soft as the Federal Open Market Committee commences its meeting.

The slate of macro data released since the previous Fed announcement has called into question the rate cuts the Fed previously signaled were to be expected in 2024.

With the confirmation the Fed has said would be needed to commence cutting rates not provided by recent data, markets are expecting a much more hawkish tone on Wednesday and bracing for a higher-for-longer rate environment, sources have said.

The Dow Jones industrial average was down 133 points, or 0.34%, the S&P 500 index was down 0.21%, the Nasdaq Composite index was down 0.26% and the Russell 2000 index was down 0.99% shortly before 11 a.m. ET.

There was little activity in the secondary space early in the session with $35 million on the tape and few names seeing concentrated trading activity.

While there were only a few scattered trades early, activity in MicroStrategy Inc.’s convertible notes is expected to pick up as the session progresses with stock under pressure post-earnings.

The 0.625% convertible notes due 2030 were down about 5.5 points outright with stock down more than 10%.

The notes were trading at 103.325 versus a stock price of $1,199 early in the session, a source said.

MicroStrategy’s stock was trading at $1,133.05, a decrease of 12.37%, shortly before 11 a.m. ET.

Stock dived after the Bitcoin bull posted a large earnings miss.

MicroStrategy posted losses per share of $8.26 versus the losses per share of 12 cents expected.

Revenue was $115.25 million versus the $121.38 million expected.

However, the large loss was largely due to the accounting of digital assets.

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