Medtronic convertibles trade flat; AMR steady to higher at 110 and change; Medivation dips

By Rebecca Melvin

New York, March 18 - If convertible bond market action was muted on Friday, it was pretty much radio silent on Monday. There was a fair amount of Medtronic Inc. convertibles changing hands right around par - those bonds have one month to go until maturity, but beyond that, trading volumes dropped off precipitously, according to Trace data.

"It's as if people took a three-day weekend; it's pretty much zippity doo dah," a New York-based convertibles analyst said when asked about the day's trading action.

Although equities ended the day down, equities underlying convertibles were fairly mixed and therefore convertible bond pricing looked mixed. But what the state of the convertible bond market was on a dollar-neutral basis was unclear given a lack of activity.

When asked if offers outnumbered bids, a New York-based trader said, "I can't really say that. It's that quiet."

Cyprus in focus

The news that European lenders have a plan to tax bank accounts in Cyprus to help pay for the island nation's debt bailout put some pressure on markets, but not unduly so, sources said.

"I would have thought that the Cyprus news would have shaken things up. If this had happened a year ago, it would have," an analyst said.

Another source said that market players were looking at the Cyprus situation as still ongoing since the plan hadn't been voted on yet. Cypriot banks, which were closed for a scheduled holiday on Monday, will remain closed Tuesday and Wednesday to allow the government to vote on new proposals including the bank deposit levy aimed at averting a collapse of its banking sector.

President Nicos Anastasiades said in an address to the nation late Sunday that without an aid package from euro-zone partners and the International Monetary Fund, the country would face default, leading to bankruptcy of the country's two largest banks.

But several sources said they thought the day's main focus was the NCAA college basketball tournament.

Meanwhile, a late winter storm was winding up to dump another round of snow, sleet and rain on the U.S. Northeast, and word of cancelations of evening activities put some commuters on watch for beating as timely an exit for home as possible.

Primary silent

No new issues were launched or priced in the U.S. primary market, and the new issue calendar remained empty for the time being.

Of names that changed hands in the convertible secondary market, bankrupt AMR Corp.'s convertibles were steady to higher in trade Monday with a print at 110.25 followed by one at 110.375 for the 6.25% convertibles due 2014, according to Trace data.

Gimme Credit upgraded AMR to "stable" from "deteriorating," and Gimme Credit analyst Vicki Bryan backed the roughly $11 billion purchase of AMR out of bankruptcy by U.S. Airways Group, saying in a note, "Under CEO Doug Parker, we expect American will 'straighten up and fly right.'"

Medivation Inc., which priced its $225 million of 2.675% convertibles due 2017 a year ago, saw its paper in trade at 121 with the shares down at roughly $45.00. Shares of the San Francisco-based biopharmaceutical company sagged as much as 3.2% during the session before paring losses to end down 65 cents, or 1.4%. The convertible bonds traded down 2.6 points, according to Trace data.

Mentioned in this article:

AMR Corp. Pink Sheets: AAMRQ

Medivation Inc. Nasdaq: MDVN

Medtronic Inc. NYSE: MDT

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