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Morning Commentary: High-grade convertibles in focus; Duke Energy, Southern Co. active
By Abigail W. Adams
Portland, Me., Nov. 28 – The convertibles primary market remained dormant early Tuesday with the lack of activity a continued surprise to many.
There are rumblings that deals are in the works and an active pipeline is anticipated through the final weeks of the year.
But with expectations for new deal volume consistently falling short throughout the year and the window of opportunity for dealmaking in 2023 narrowing, the level of primary market activity that will materialize is in question.
Meanwhile, the secondary space was active early Tuesday with the market remaining firm on a mixed open for equities.
The Dow Jones industrial average was up 98 points, or 0.28%, the S&P 500 index was up 0.09%, the Nasdaq Composite index was up 0.01% and the Russell 2000 index was down 0.40% shortly before 11 a.m. ET.
There was $108 million in reported convertible bond trading volume about one hour into the session with high-grade names dominating the tape.
Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) and Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) saw the heaviest volume early in the session although with little movement in price.
Duke’s 4.125% convertible notes due 2026 were changing hands at 98.375 versus a stock price of $90.87 early in the session, according to a market source.
There was $13 million in reported volume.
Duke’s stock was trading at $91.52, an increase of 0.62%, shortly before 11 a.m. ET.
Southern Co.’s 3.875% convertible notes due 2025 were trading at 99.875 versus a stock price of $70.27, a source said.
There was $14 million in reported volume.
Southern Co.’s stock was trading at $70.81, an increase of 0.80%, shortly before 11 a.m. ET.
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