Morning Commentary: Convertible bonds little changed as trading thins in final week of August

By Stephanie N. Rotondo

Seattle, Aug. 28 – The convertible bond market was muted as Monday trading got underway.

There was “nothing doing,” a trader said.

In fact, at mid-morning the total trading volume in the convertibles realm amounted to less than $40 million, according to a market source.

Among the most active issues – relatively speaking – Altaba Inc.’s 0% convertible notes due 2018 were following the company’s stock lower.

A source saw the notes sliding nearly 2 points to around 124.20. The underlying equity (Nasdaq: AABA) was meantime down $1.01, or 1.57%, at $63.50.

There was no fresh news out on the name to cause the weakness.

Illumina Inc.’s 0.5% convertible notes due 2021 were also in play. The name has been on the radar of late, though without any news to act as catalyst.

The convertibles were unchanged in early dealings, trading at 114, a source reported.

However, the company’s shares (Nasdaq: ILMN) were pushing up about 2.36% in early dealings.

Also unchanged were WebMD Health Corp.’s 2.625% convertible notes due 2023, which were pegged around par.

WebMD stock (Nasdaq: WBMD) was a share higher at mid-morning.

While the online health information provider’s convertible bonds have seen modest trading in the last month, the paper has moved very little since the company announced on July 24 that it was being bought by KKR & Co. for $2.8 billion.

The takeover triggered a make-whole premium on the company’s convertible debt, which increased the conversion rate for each debenture.

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