Morning Commentary: Medicines convertibles expand on swap on positive drug trial data; Yahoo! adds

By Rebecca Melvin

New York, Aug. 31 – The Medicines Co.’s convertibles jumped on an outright basis and expanded on swap in active trade on Monday after positive initial results of an early stage study of a cholesterol drug the Parsippany, N.J.-based health care company is developing with partner Alnylam Pharmaceuticals Inc.

Medicines’ 1.375% convertibles due 2017 traded up 15 points to 146.50 and was up 2 points on swap, according to market sources.

Medicines’ 2.5% convertibles due 2022 were up 14.5 points on an outright basis to 135 bid, 136 offered versus an underlying share price of $40.00 and were seen up as much as 3 points on swap, sources said.

Medicines shares were last up $5.48, or 16%, to $39.12.

Also Yahoo! Inc.’s 0% convertibles were trading stronger even though shares of the Sunnyvale, Calif.-based internet company were weak.

The Yahoo! bonds were quoted at 102.875 bid. 103.875 offered versus an underlying share price of $32.54. That was up more than 1 point on swap in the last one to two weeks.

Yahoo! was trading up amid chatter that holders are pushing the company to treat the Alibaba Group spinoff as a change of control, a Connecticut-based trader said.

Elsewhere, U.S. convertibles players were eyeing lower stocks on the last day of the month, which is set to be the biggest monthly decline in equities since 2008.

As convertibles players look ahead to September, the last month of the quarter, they may be inclined to sell some of the issues that have been unprofitable – especially the biggest losers, a New York-based trader said. “But when we’re talking about coal or oil, most that that paper is priced way down already.”

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