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Morning Commentary: Investment-grade convertible issues return to focus
By Abigail W. Adams
Portland, Me., Sept. 27 – The convertibles primary market remained dormant early Wednesday with expectations low for new deal activity before the quarter draws to a close.
While there is expected to be a lull in activity over the next few weeks with issuers in earnings season blackout, the primary market is expected to see an active fourth quarter, sources say.
With no new issuance to spark trading activity, the secondary space was quiet early Wednesday with equity indexes mixed and Treasuries largely flat.
After launching the day well bid, equity indexes lost steam with the Dow Jones industrial average down 89 points, or 0.28%, the S&P 500 index down 0.06%, the Nasdaq Composite index down 0.02% and the Russell 2000 index up 1.32% shortly before 11 a.m. ET.
There was $70 million in reported volume about one hour into the session with investment-grade issues again dominating the tape.
Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) were the top traded notes in the secondary space although with little movement in price.
The notes were trading at 97.875 early in the session versus a stock price of $67.08, according to a market source.
There was $7.5 million in reported volume.
Southern Co.’s stock was down $66.93, a decrease of 0.28%, shortly before 11 a.m. ET.
Expedia Inc.’s 0% convertibles due 2026 (Baa3/BBB/BBB-) also saw heavy volume with $5 million plus changing hands in a single trade.
The 0% notes were also largely unchanged with the notes trading at 86.625 versus a stock price of $99.82 shortly before the market close, according to a market source.
The yield was about 6.125%.
Expedia’s stock was trading at $100.60, an increase of 1.17%, shortly before 11 a.m. ET.
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