Convertibles stabilize after early weakness; Janus Capital busy; Micron active on earnings

By Rebecca Melvin

New York, Sept. 26 – Convertibles opened a little weaker but found their footing and stabilized by midday on Friday. The convertibles market had dropped Thursday amid a slide in high yield and equities.

Convertibles followed the lead of high yield again early on Friday, lagging equities, but recovered, a New York-based trader said.

Volumes were light, so it was difficult to “make much sense of it,” the trader said. “But it seems to have stabilized.”

SolarCity Corp.’s new 1.625% convertibles recouped about 0.5 point on a dollar-neutral basis after dropping a point on their debut Thursday after the San Mateo, Calif.-based clean energy company priced $500 million of the five-year senior notes at the cheap end of talked terms.

But Newmont Mining Corp.’s 1.625% convertibles were lower again by about 0.5 point on a dollar-neutral basis, with gold companies losing another 0.625 point on Wednesday on top of a 1-point drop on Tuesday as higher interest rates and the U.S. dollar caused gold prices and gold miners to go lower.

Micron Technology Inc. was a focus of trade after the Boise, Idaho-based chipmaker reported better-than-expected revenue that rose 6% and guided higher on revenue for the current quarter. Micron shares surged 6.7%.

“Continued favorable market conditions and steady execution led to higher sales and strong margins,” Micron said in a news release.

SanDisk Corp.’s 0.5% convertibles traded in sympathy with the Micron results, a New York-based trader said. Shares of the Milpitas, Calif.-based data storage company ended up 2.3%.

All in all, however, the session was “uneventful,” according to a New York-based trader.

A volume name was Janus Capital Group Inc. following news that Bill Gross is leaving Pacific Investment Management Co., the fund he co-founded and of which he was chief investment officer, to join Janus.

Janus shares surged 31% to $14.60, and the Janus 0.75% convertibles changed hands at 143.44, according to Trace data. The convertibles were last about 128 or 129. In June, the Denver-based asset management company’s 0.75% convertibles traded at 126.35 with shares at $12.26.

Equities bounced Friday from Thursday’s tumble, but were still down for the week.

The Dow Jones industrial average gained 167.35 points, or 1%, to 17,113.15; the S&P 500 rose 16.86 points, or 0.9%, to 1,982.85; and the Nasdaq Composite added 45.45 points, or 1%, to 4,512.19.

For the week, the Dow fell 1%, the S&P lost 1.4% and the Nasdaq shed 1.5%.

Micron in trade

Micron’s 3% convertibles due 2043 traded at 131 against shares of about $33.83. The bonds were last seen at about 125. The bonds had traded at 129.375 versus an underlying share price of $32.86 on July 7.

Micron’s 1.625% convertibles due 2033, or the E series, traded at 301. The bonds were last at 290.5.

The Micron 2.375% convertibles due 2032, or the C series, traded at 355.5, compared to 332.4, according to a market source.

Micron shares jumped out of the gate and ended up $2.13, or 6.7%, to $33.83 on Friday.

The company reported a fiscal fourth-quarter profit of $1.15 billion, or 96 cents per share, which was down from $1.71 billion, or $1.51 a share, the year earlier.

Earnings excluding items were 82 cents a share. Revenue was $4.23 billion. Analysts had forecast profit of 81 cents a share on revenue of $4.16 billion.

Mentioned in this article:

Janus Capital Group Inc. NYSE: JNS

Micron Technology Inc. NYSE: MU

Newmont Mining Corp. NYSE: NEM

SanDisk Corp. Nasdaq: SNDK

SolarCity Inc. Nasdaq: SCTY

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