Morning Commentary: Convertibles quiet ahead of Fed policy update; solar names up; SunPower flat on swap

By Rebecca Melvin

New York, Dec. 16 – U.S. convertibles remained quiet in trading on Wednesday ahead of the conclusion of the Federal Open Market Committee’s final policy meeting of the year at which the central bank is expected to bump up interest rates by a small amount for the first time in nine years.

The market was largely focused on potential volatility that the widely telegraphed Fed meeting could spark.

“I’m not going to say there will not be volatility, but if they do what everyone expects, which is lift off, reiterate their intention to go slow and remain data driven, it shouldn’t be market-moving information. But there was certainly more vol. leading up to this than I would have expected,” a New York-based convertibles banker said.

Very little was trading Wednesday morning, market sources said. But there was some movement in solar names after lawmakers put forward a tax and budget deal that includes a continuation of the investor tax credit for solar energy.

SunPower Corp.’s 4% convertibles, which priced earlier this month, jumped another 10 points to about 115, but they were unchanged, or flat, on a swap basis, a New York-based trader said. Underlying shares of the San Jose, Calif.-based solar company that were up $3.20, or 13%, at $27.52.

SolarCity Corp.’s convertibles were also higher after the appropriations and tax bills were introduced on Wednesday. The proposed legislation follows quickly on the heels of a global climate agreement in Paris, SolarCity noted in a press release.

SolarCity’s 1.625% convertibles due 2019 traded up to 81.50 early Wednesday from about 75 on Tuesday, according to Trace data. The underlying shares surged $10.15, or 25%, to $50.20.

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