Merrill Lynch notes convertibles richening in April

By Ronda Fears

Nashville, Tenn., May 7 - April was harsh on equities, while convertibles stayed defensive - but the strength caused prices to richen relative to fair value, noted Merrill Lynch & Co. convertible analysts in a report Tuesday.

The overall Merrill U.S. convertibles index now averages 3.1% cheap versus 4.0% cheap at the end of March, said Merrill U.S. convertible research director Yaw Debrah and analyst Tatyana Hube.

Average conversion premium for the index expanded to 67% from 62%, indicating a more defensive nature, following poor stock performance in April. Concurrently, the average investment value premium contracted to 26% in April from 31% in March.

Total market value for the index dropped down to $234.6 billion at the end of April from $236.8 billion at the end of March, despite positive net issuance for the month.

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