Convertibles secondary well bid at quarter’s end; Rivian hits new high; PPL on uptrend

By Abigail W. Adams

Portland, Me., March 31 – The convertibles secondary space closed a rocky quarter on firm footing with the market well bid on Friday.

The tone in the market continued to improve as equity indexes extended their gains on the heels of a softer-than-expected Consumer Price Expenditure report and fading concerns about the stability of the banking sector.

The Dow Jones industrial average closed Friday up 415 points, or 1.26%, the S&P 500 index closed up 1.44%, the Nasdaq Composite index closed up 1.74% and the Russell 2000 index closed up 1.88%.

There was $61 million in reported convertibles trading volume about one hour into the session and $422 million in reported volume about one hour before the market close.

Outright buyers continued to put money to work in the secondary space with convertibles trading with high bond floors in demand, a source said.

However, hedge accounts were active buyers on Friday as well.

The investment-grade issues of 2023 continued to dominate the tape on Friday with PPL Capital Funding Inc.’s 2.875% convertible notes due 2028 (Baa1/BBB+) closing the day above par.

Rivian Automotive Inc.’s 4.625% convertible notes due 2029 continued their strong uptrend with the notes hitting their highest outright level since pricing after a volatile month.

Yield plays were also active with Spotify Technology SA’s 0% exchangeable notes due 2026 and NextEra Energy Partners LP’s 0% convertible notes due June 15, 2024 active in early trade.

PPL above par

PPL’s 2.875% convertible notes due 2028 continued to improve in heavy volume on Friday with the notes closing the day above par.

The 2.875% notes traded up to 100.375 late in the session, according to a market source.

There was $14 million in reported volume.

PPL’s stock traded to a low of $27.47 and a high of $27.80 before closing at $27.79, up 0.82%.

PPL’s 2.875% convertible notes were the laggards of investment-grade issuance to price in late February.

The notes traded down to a 96-handle following Silicon Valley Bank’s collapse.

However, the notes have been on a strong uptrend over the past week and a half with the notes becoming increasingly attractive amid the widening of credit spreads.

The 2.875% notes brushed against par the previous session.

Friday marked the highest trading level for the notes since shortly after the $1 billion issue priced at par on Feb. 21.

Rivian rebounds

Rivian’s 4.625% convertible notes due 2029 continued their strong rebound with the notes hitting their highest outright level since pricing.

The 4.625% notes were seen at 103.5 versus a stock price of $15.42 in the late afternoon, according to a market source.

They climbed to a 104-handle heading into the market close.

The notes gained on swap on the move up.

“Suddenly there’s a bid for them,” a source said.

There was $11 million in reported volume.

Rivian’s stock traded to a low of $14.41 and a high of $15.68 before closing at $15.48, an increase of 7.5%.

Rivian’s 4.625% notes have seen a volatile month with the notes trading on a 92-handle as recently as March 20.

The notes opened the week on a 95-handle but have been on a strong uptrend as buyers returned to the market.

Yield plays

Outright accounts continued to put money to work in the secondary space on Friday with names with high bond floors in demand.

Spotify’s 0% exchangeable notes due 2026 improved in active trade.

The 0% notes were changing hands at 84 versus a stock price of $132.15 early in the session, according to a market source.

They were trading at 83.75 in the late afternoon.

The yield was about 6.25%.

There was $6 million in reported volume.

Spotify’s stock traded to a low of $130.52 and a high of $134.36 before closing at $133.62, an increase of 2.12%.

NextEra Energy’s 0% convertible notes due June 15, 2024 saw a flurry of activity early in the session although it petered out as the session progressed.

The notes saw little movement in price as their maturity approaches.

The 0% notes were seen just north of 92.75 for a yield of about 6.375% early in the session.

There was $4 million in reported volume.

NextEra’s stock traded to a low of $58.20 and a high of $61.22 before closing at $60.75, an increase of 4.85%.

Mentioned in this article:

NextEra Energy Partners LP NYSE: NEP

PPL Capital Funding Inc. NYSE: PPL

Rivian Automotive Inc. Nasdaq: RIVN

Spotify Technology SA NYSE: SPOT

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