Convertibles start new year off on quiet note; weaker shares weigh on market activity

By Rebecca Melvin

New York, Jan. 2 – Convertibles were extremely quiet on Friday, which marked the first trading day of 2015. Trading desks maintained skeleton crews following Thursday’s market shutdown for New Year’s Day, and stocks, which lagged for much of the session, didn’t provide a trading catalyst, sources said.

“There’s not really anything going on. Nobody is in the office,” a New York-based trader said.

Given the combination of how the holidays fell this year and the generally dour market tone following a less than terrific 2014, it seemed like a quieter-than-usual start to the year, sources said.

In the broader markets, stocks ended mixed to lower, bonds were off and oil was down.

The Dow Jones industrial average eked out a small positive close on Friday as stocks pared intraday losses. The Dow ended up 9.92 points, or 0.06% at 17,832.99. The S&P 500 stock index also recovered ground but ended in the red by less than one point at 2,058.20; while the Nasdaq stock market closed down 9.24 points, or 0.2%, for a 4,726.81 close.

Oil dropped to a 5.5-year low as signs of strong supply and lagging demand continued. China manufacturing fell to its weakest level in 18 months, government data showed on Thursday, and data from Russia’s Energy Ministry showed that that country’s 2014 oil output hit its highest level in decades at 10.58 million barrels per day.

West Texas intermediate for February delivery dropped 58 cents, or 1%, to $52.69 a barrel, its lowest close since April 30, 2009.

Tesla Motors Inc.’s convertibles changed hands and were down a point or so as shares sank, but it was “nothing material,” a trader said.

Tesla shares pared morning losses by about half, ending the session down $3.10, or 1.4%, at $219.31. Earlier Tesla shares were off more than $7.00, or 3%.

Tesla Motors’ 1.5% convertibles due 2018, referred to as the old tranche, were seen at 180 and change versus a share price of $215.00 at late morning.

Tesla Motors’ 0.25% convertibles due 2019, or the A tranche, were wrapped around 92, which was down about a point from previous trades, and the Tesla 1.25% convertibles due 2021, or the B tranche, were quoted at 89.25.

Priceline Group Inc.’s 0.9% convertible was in focus on one desk, although not trading actively. The bond was seen slightly lower versus shares of the Norwalk, Conn.-based online travel company, which were off in early hours but trended little changed for much of the session.

The Priceline 0.9% convertible was quoted at 95.375 bid, 95.5 offered, which was slightly below its previous level of 95.625, a New York-based trader said.

Priceline shares ended up $1.85, or 0.2%, at $1,142.06.

HomeAway Inc.’s shares did not pare early losses, remaining close to their lows for the day and ending down 88 cents, or nearly 3%, at $28.90.

HomeAway’s 0.125% convertibles, which priced last March, were quoted at 93.125 bid, 93.625 offered with the shares at $29.05, one New York-based sellsider said.

“It wasn’t a great year, and so people are not in a great mood,” a second New York-based sellsider said. “Things will probably get going in the middle to end of next week.”

One name on Friday that was strongly to the upside was SouFun Holdings Ltd. SouFun shares surged 93 cents, or 12.6%, to $8.32. SouFun’s 2% convertibles were indicated up to 90.8 from 88.3, according to a market source.

Buoying this China real estate website and other real estate names was word that the city of Beijing is raising the limit on some first-time homebuyer loans through a public housing fund to 1.2 million yuan from 800,000 yuan.

Mentioned in this article:

HomeAway Inc. Nasdaq: AWAY

Priceline Group Inc. Nasdaq: PCLN

SouFun Holdings Ltd. Nasdaq: SFUN

Tesla Motors Inc. Nasdaq: TSLA

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