Convertibles weak; Intel drops outright after earnings; Red Hat below par; Monster on tap

By Rebecca Melvin

New York, Oct. 15 – U.S. convertibles moved lower amid a downdraft in equities on Wednesday, but many names, like some of the newer, investment-grade paper, held in on a hedged basis amid a massive move in the bond market, a New York-based trader said.

Red Hat Inc.’s newer 0.25% convertibles due 2019, an $805 million issue that priced Oct. 2, fell below par to about 99.75 amid a 3% stock decline. The bond’s valuation was still attractive, a trader said, given the impact of the bond market move on the paper’s valuation.

“Some of the longer-dated, IG paper has done OK because of the bond market move. This was a massive move and it makes a gigantic difference in valuations,” the trader said.

He added that he hadn’t seen much of the Red Hat paper in trade on Wednesday.

Early Wednesday, Intel Corp. was a focus, accounting for a sizable chunk of total volume traded after the Santa Clara, Calif.-based chipmaker reported better-than-expected earnings, but the stock price moved down.

After the market close, Monster Worldwide Inc. launched an offering of $125 million of five-year convertible senior notes in a Rule 144A deal.

The U.S. Treasury 10-year note’s yield fell below 2% during the session but edged above 2% by the end of the session.

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