Convertibles quiet amid volatility; Alliant, Southern Co. active; Sarepta up on swap

By Abigail W. Adams

Portland, Me., March 17 – It was a quiet day in the convertibles secondary space with few making moves as triple witching day converged with continued uncertainty in the banking sector and reduced rate expectations.

Credit and equity markets continued to reel after a tumultuous week.

“No one wants to be long over the weekend,” a source said. “Who knows what’s going to happen.”

Equity markets were mixed early in the session, but heavy selling took hold as the session progressed with indexes falling deep into the red.

The Dow Jones industrial average closed down 385 points, or 1.19%, the S&P 500 index closed down 1.10%, the Nasdaq Composite index closed down 0.74% and the Russell 2000 index closed down 2.56%.

There was $50 million in reported volume about one hour into the session and $293 million on the tape about one hour before the market close.

It was a “sloppy boring day,” a source said.

Liquid issues remained in focus with the recently priced investment-grade convertible notes continuing to dominate the tape.

Alliant Energy Corp.’s 3.875% convertible notes due 2026 (BBB+) and Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) continued to improve outright although they were lagging in the rate rally.

Topical news pushed Sarepta Therapeutics Inc.’s 1.25% convertible notes due 2027 into focus with the notes falling outright but expanding on hedge as stock sank double digits.

Investment grade

Investment-grade convertible notes continued to dominate the tape with trading activity centered on large liquid issues.

Alliant’s 3.875% convertible notes due 2026 and Southern Co.’s 3.875% convertible notes due 2025 were “holding up” amid the volatility in markets, a source said.

The notes continued to improve outright and on an equity hedge.

However, they continued to lag the move in rates, a source said.

Alliant’s 3.875% convertible notes due 2026 continued to trade on a 101-handle after a steady climb throughout the week.

The 3.875% notes were trading in the 101.5 to 101.75 context during Friday’s session.

There was $12 million in reported volume.

Alliant’s stock traded to a low of $52.66 and a high of $53.61 before closing at $53.17, down 0.6%.

The notes opened the week on a 99-handle.

Southern Co.’s 3.875% convertible notes due 2025 continued to hold above par.

The 3.875% notes were changing hands just north of 100.25 versus a stock price of $68.09 in the late afternoon.

There was $43 million in reported volume.

Southern Co.’s stock traded to a low of $67.35 and a high of $69.05 before closing at $67.90, off 0.32%.

The notes opened the week on a 98-handle.

Sarepta expands on hedge

Sarepta’s 1.25% convertible notes due 2027 were pushed into the spotlight as stock plunged with Food and Drug Administration approval for a product in its pipeline in doubt.

The 1.25% convertibles sank 16 points outright with stock down 20% in intraday activity.

The notes were seen at 110 versus a stock price of $120.05 early in the session.

They closed the day wrapped around 110.

The convertibles expanded about 0.75 point dollar-neutral, a source said.

There was $7 million in reported volume.

Sarepta’s stock traded to a low of $117.11 and a high of $125.08 before closing at $122.69, a decrease of 18.03%.

Stock sank after the company announced the FDA was consulting with an advisory committee to evaluate the company’s treatment for Duchenne muscular dystrophy.

The announcement came shortly after the company stated the FDA would not hold an advisory committee meeting on the treatment as part of its approval process.

Mentioned in this article:

Alliant Energy Corp. Nasdaq: LNT

Sarepta Therapeutics Inc. Nasdaq: SRPT

Southern Co. NYSE: SO

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