Convertibles quiet, steady post Fed; some health-care names better bid; Medicines edges up

By Rebecca Melvin

New York, Sept. 18 – U.S. convertibles were mostly quiet as the common shares underlying many names fluctuated on Friday.

The equities markets overall were selling off with the major indices down more than 1% as investors digested the Federal Reserve’s decision to keep its Federal Funds rate unchanged at near 0%.

Convertibles, which saw an expansion of about 0.25 point early Thursday leading into the announcement, were largely unchanged afterwards, and the same was true early Friday, a New York-based trader said.

“It’s kinda dead, actually,” he said. But the selling in equities was on heavy volume.

In convertibles there was some strength in various health-care names. The trading was company specific, a trader said.

Medicines Co.’s 1.375% convertibles due 2017 were a little stronger with the underlying shares of the Parsippany, N.J.-based health care company down about 1%.

The convertibles of Ariad Pharmaceuticals Inc. and Synergy Pharmaceuticals Inc. were better on swap by 0.25 point to 0.5 point on weaker shares. And Tesaro Inc.’s 3% convertible bonds remained better bid after the shares and convertibles jumped on Thursday.

“They were bid where they were lifted on Thursday,” the trader said of Tesaro.

“Some of the names in the health-care sector are better to buy,” the trader said. Earlier in the week, health care had been quieter. But people are still looking at some specific names and expect M&A to be a catalyst to price movement, he said.

Elsewhere, Extra Space Storage Inc.’s 3.125% exchangeable, which debuted in the market on Wednesday, remained right around par but were not active in trade, a syndicate source said.

Other names that had been notably active in the past few days were quiet, including Vipshop Holdings Ltd. and Qihoo 360 Technology Co. Ltd.

Vipshop’s 1.5% bonds due 2019 were around 111.5 with the shares down nearly 1% at $17.40.

Qihoo’s 2.5% convertibles due 2018 were unchanged at 95.125 with the shares up 0.6% at $45.85.

Medicines better bid

Medicines’ 2.5% convertibles due 2022 were seen trading at 160.526 versus an underlying share price of $43.05 on Friday, which was up from 159.868 versus an underlying share price of $42.81 on Wednesday.

The bonds were fairly active as shares were up 14.5 points on an outright basis to 135 bid, 136 offered as shares traded down 88 cents, or 2%, at $42.43.

The bonds continue to ride higher on positive news at the end of last month of a positive early study for the Parsippany, N.J.-based health care company’s cholesterol drug, a trader said.

Ariad, Synergy add on swap

Ariad’s 3.625% convertibles due 2019 were quoted at 112.875 bid, 113.625 offered versus an underlying share price of about $8.00 at the end of the session. Shares ended down 17 cents, or 2.1%, at $7.99.

The bonds were trading a little better by about 0.25 point to 0.5 point, a trader said.

Synergy’s 7.5% convertibles due 2019 were seen at 137 bid, 139 offered versus an underlying share price of $7.33.

Those bonds were also better by 0.25 point to 0.5 point with the underlying shares of the New York-based biopharmaceutical company down 32 cents, or 4%, at $7.32.

Synergy is focused primarily on the development of drugs to treat gastrointestinal disorders and diseases.

Mentioned in this article:

Ariad Pharmaceuticals Inc. Nasdaq: ARIA

Extra Space Storage Inc. NYSE: EXT

Medicines Co. Nasdaq: MDCO

Synergy Pharmaceuticals Inc. Nasdaq: SGYP

Tesaro Inc. Nasdaq: TSRO

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