Morning Commentary: Newmont remains weaker; new Oclaro 6% notes quiet in the aftermarket

By Rebecca Melvin

New York, Feb. 13 – Newmont Mining Corp.’s 1.625% convertibles were active again early Friday, as has been the case for much of the week. The bonds have weakened this past week despite higher shares of the Denver-based gold and copper mining company.

The Newmont bond traded at 103.5 in the early going Friday, which was unchanged on an outright basis. But shares popped as much as 2% early Friday and were up 1.5% at $24.88 most recently. On Wednesday, the Newmont bonds were quoted at 104 versus an underlying share price of $24.20.

On Thursday, the Newmont bond was also trading actively and quoted down 0.69 point on a dollar-neutral, or hedged, basis.

The bond is considered rich for investors, with its negative yield and very high premium, a New York-based trader said.

Meanwhile higher Treasury yields this week were an added negative for the bond. The 10-year Treasury yield was hovering around 2%, which is up for the week, although still significantly lower from the end of December.

Meanwhile Newmont shares remain elevated since the middle of last month when gold prices rallied.

“Once dealers who are short finish covering, pricing may normalize,” the trader said.

Elsewhere Oclaro Inc.’s newly priced 6% convertibles were quiet Friday after the San Jose, Calif.-based optical components maker priced $55 million of the five-year senior notes at the midpoint of coupon talk and beyond the rich end of premium talk.

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