Morning Commentary: Starwood convertible notes hit new heights in early trading

By Abigail W. Adams

Portland, Me., July 11 – It was another sleepy start to the day in the convertibles secondary space on Tuesday with few making moves ahead of the Wednesday release of the Consumer Price Index report and the start of earnings.

Equity indexes posted nominal gains early in the session with the Dow Jones industrial average up 125 points, or 0.36%, the S&P 500 index up 0.26%, the Nasdaq Composite index up 0.25% and the Russell 2000 index up 0.55% shortly before 11 a.m. ET.

There was $60 million in reported volume about one hour into the session with no name seeing more than $5 million in reported volume.

While activity in the name was light, Starwood Property Trust Inc.’s recently priced 6.75% convertible notes due 2027 (/BB-) traded up to their highest outright level since hitting the secondary space in late June.

The 6.75% convertible notes gained 1 point outright with stock up about 1%.

The notes were changing hands at 104.125 versus a stock price of $20.37 early in the session.

There was $3 million in reported volume.

Starwood’s stock was trading at $20.51, an increase of 1.01%, shortly before 11 a.m. ET.

The 6.75% convertible notes saw a rough start in secondary market activity with the notes falling below par outright and contracting dollar-neutral.

However, the notes have been gaining on an outright basis with stock up more than 6% over the past five trading sessions.

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