Convertibles quiet; Greenbrier slips with lower shares on trimmed guidance; Trinity eyed

By Rebecca Melvin

New York, July 6 – U.S. convertibles held their own, starting off the session Wednesday a little heavy in light volume as equities and oil prices traded down, but improving with equities and oil later in the day, albeit in light volume.

A New York-based sellsider agreed that things were a little heavy early in the day particularly because volume was especially light.

Equities and oil turned higher, helped by improved sentiment after the release of the minutes from the Federal Reserve’s last policy-setting meeting. The Fed minutes said that it was prudent to wait for more data and the Brexit vote results before raising interest rates, and cited a slowdown in hiring as a reason for keeping rates unchanged at its meeting in the middle of June.

The meeting came on the heels of a weak U.S. payrolls report for May. This Friday, the June jobs report is slated to be released.

Meanwhile the ISM non-manufacturing PMI came in better at 56.5 for June compared to 52.9 in May.

Rattling markets somewhat was news that U.K. funds Henderson Global and Columbia Threadneedle became the latest firms among U.K. property funds to close. The closures did not have and were not expected to have any impact on the U.S. convertibles market, a New York-based trader said.

U.S. equities ended higher, and West Texas Intermediate crude oil for August delivery closed up 83 cents, or 1.8%, to $47.43 after slipping 1.1% to $46.11 per barrel in early action on the New York Mercantile Exchange and after dropping 4.5% on Tuesday.

The Dow Jones industrial average reversed fractional losses around midday to close up 78 points, or 0.4%, at 17.918.62; the S&P 500 stock index reversed mild losses to close up 11.18 points, or 0.5%, to 2,099.73 and the Nasdaq stock market ended up 36.26 points, or 0.8%, at 4,859.16.

Treasury rates recovered, with the 10-year Treasury yield ending at 1.38%, which was up from a record low of 1.321% on Tuesday

The common shares of the Greenbrier Cos. Inc. were lower in the early going after the Lake Oswego, Ore.-based rail freight car maker reported third-quarter earnings that beat estimates but trimmed its full-year guidance.

The Greenbrier 3.5% convertibles due 2018 traded at 104 early Wednesday, which was down from 105.4 on Tuesday and 107.5 earlier this month, according to Trace data.

Greenbrier shares were down $2.27, or 8%, at $26.51 at late morning but closed even weaker, down $2.66, or 9.2%, at $26.13.

The Greenbrier convertible bonds were indicated down to 99.5 at the close, according to a pricing source.

Greenbrier said it expects full-year earnings to be $5.70 to $5.90 per share, which shaved the top end of Greenbrier’s prior guidance by $0.20 per share. It expects revenue to be $2.8 billion and full-year deliveries of between 20,000 and 21,000, which represents the lower half of its previous range.

Shares of Trinity Industries Inc., a Dallas-based railcar/industrial manufacturing company, were down about 2% at $18.62 early Wednesday, but the Trinity 3.875% convertibles due 2036 didn’t appear to have traded. They were last at 109.6 on July 1, according to Trace data.

Elsewhere, Cheniere Energy Inc.’s 4.25% convertibles traded actively on Wednesday but barely budged, settling around the 57.25 mark. Whiting Petroleum Corp.’s 1.25% convertibles due 2020 remained untraded at 79.08.

SunEdison Inc.’s 5% convertibles were indicated to have dropped to 15 from 21.50, according to a pricing source.

Mentioned in this article:

Cheniere Energy Inc. NYSE: LNG

Greenbrier Cos. Inc. NYSE: GBX

SunEdison Inc. Pink sheets: SUNEQ

Trinity Industries Inc. NYSE: TRN

Whiting Petroleum Corp. NYSE: WLL

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