Morning Commentary: Convertibles weaken amid market turmoil over Greece; Tesla lower; Peabody quiet

By Rebecca Melvin

New York, June 29 – U.S. convertibles were generally weaker early Monday as issue-specific trading was eclipsed by a risk-off sentiment in the broader markets amid uncertainty over the Greek debt situation.

Negotiations with Greece’s creditors broke down, and late Friday that government called a July 5 referendum to decide whether to accept or reject conditions for a bailout. A “no” vote could mean the country’s exit from the euro.

Convertible paper was lower by about 0.25 point to 0.5 point, in general, traders said.

U.S. stock markets opened sharply lower following losses in Asia and Europe overnight. Gold and U.S. Treasuries were higher as investors sought safe havens.

The Greek stock market was closed on Monday and will remain shuttered for the week, and Greek banks were also shut. Greek bonds plummeted, pushing the two-year yield more than 12 percentage points higher to 33%.

At late morning, the S&P 500 stock market was down 18 points, or 0.9%, at 2,083.

Tesla Motors Inc.’s convertibles were weaker on Monday amid general market pressure and after the company’s unmanned SpaceX rocket, carrying supplies to the International Space Station, exploded shortly after liftoff on Sunday.

Tesla’s 0.25% convertibles due 2019 changed hands at 97.75, which was down 1.5 points from Friday’s last level, according to Trace data.

Tesla’s 1.25% convertibles due 2021 traded last at 95.54, which was down from 98.2 on Friday, according to Trace data.

Tesla’s 1.5% convertibles due 2018 were last at 214.75 which was down from 217.

Tesla shares were down last $3.03, or 1%, to $264.06.

But much of the convertibles market was inactive early Monday. Peabody Energy Corp. was quiet after its convertibles dropped sharply on Friday on word of a rating downgrade. Moody’s Investors Service downgraded the company to Ba2 from Ba1, citing high leverage for the St. Louis-based coal company amid an ongoing price decline in metallurgical coal and a drop in oil prices.

The Peabody 4.75% convertibles due 2066 traded last at 15 on Friday, which was down from 18 to 20 on Thursday.

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