Convertibles mostly steady, some vol. names up as equities slide; WellPoint flat; AMAG slips

By Rebecca Melvin

New York, April 10 - Convertibles traded fairly quietly Thursday, 'holding in' on a dollar-neutral, or hedged, basis in early trading and then bouncing around a bit in mostly illiquid trade amid a sharp selloff in equities, market players said.

The slide in equities left the major stock indexes down between 1% to 3%, and at their lows for the session.

"In aggregate, I think things were unchanged; some of the bonds in the 150-range were 'better to buy,' some of the vol. names were better," one New York-based trader said.

There were buyers of Jarden Corp.: "People are interested in that one," he said.

Thursday was quieter than Wednesday, a second New York-based trader said, with WellPoint Inc.'s 2.75% convertible bonds due 2042 taking up a notable chunk of volume as has often been the case in recent sessions.

At the end of the day, the WellPoint bonds were at about 141.5, down about 0.5 point, according to Trace data, with shares of the Indianapolis-based health benefits company ending down $1.07, or 1%.

The convertibles of Intel Corp., Priceline.com Inc. and SanDisk Corp. remained vigorously traded, just as they had been on Wednesday.

On Wednesday, WellPoint, Priceline, Intel, International Game Technology and SanDisk made up about 50% of the session's trading volume.

The large, liquid issues of these companies are "easy names to trade," a New York-based trader explained. There's no credit risk to worry about and instead the focus can be on volatility."

"Some people are waiting for the 'great unwind,'" the trader said. "They are looking at their positions and seeing that they should work out nicely if the market cracks and rates have not moved much," he said.

"They rode these up 50 points to about the 150 mark, and now they can ride them back down, and if rates remain low, they will spread out nicely," he said.

Falling into a different category from the high-volume names was AMAG Pharmaceuticals Inc., and its 2.5% convertibles, which priced in early February. The bonds slipped below par on Thursday amid a 4% drop in the underlying shares of the Waltham, Mass.-based specialty pharmaceutical company.

But CommonWealth REIT's convertible preferred shares were up 51 cents, or 2%, at $25.77 in strong volume on the back of news that holders of the preferreds of the Newton, Mass.-based office and industrial real estate investment trust can exercise their right to convert into shares as a result of a fundamental change.

Equities fell sharply, led by losses in technology and biotechnology companies and especially momentum names that had risen strongly at the end of 2013 and into 2014. The plunge followed a rally on Wednesday after the release of the minutes of the last Federal Open Market Committee meeting.

The Nasdaq stock index was once again the hardest hit market, dropping an eye-popping 129.79 points, or 3%, to 4054.11.

The S&P 500 stock index lost 39.10, or 2.1%, to 1833.08 and the Dow Jones industrial average fell 266.96 points, or 1.6%, to 16,170.22.

The reversal from Wednesday came despite positive data in the form of initial jobless claims, which fell 32,000 to a seasonally adjusted 300,000 last week, representing its lowest level in seven years. Economists had forecast 320,000 new claims for the week. The four-week moving average of claims fell 4,750 to 316,250.

But investors are wary heading into earnings season and are skeptical about the strength of the U.S. economy.

WellPoint trades actively

WellPoint's 2.75% convertibles due 2042 were seen at 141.5 late in the session with the underlying shares at $95.74, down $1.07, or 1%.

The WellPoint convertibles were seen at about 142 on Wednesday.

The bonds have been very actively traded amid renewed short interest from hedged players given their current valuation, a trader said.

Meanwhile, AMAG's 2.5% convertibles due 2019 traded at 98.685 late Thursday with the underlying shares of the pharmaceutical company sliding 78 cents, or 4.2%, to $17.82.

AMAG priced an upsized $200 million of the five-year convertibles in February at terms that were mixed compared to talk, and they rose to 103 in their debut despite shares that lost 1%.

By the end of February, the AMAG bonds had risen to 107.125 versus an underlying share price of $21.47. And on March 11, the AMAG bonds changed hands at 110.735, according to Trace data.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Commonwealth REIT NYSE: CWH

Intel Corp. Nasdaq: INTC

Jarden Corp. NYSE: JAH

Priceline.com Inc. Nasdaq: PCLN

SanDisk Corp. Nasdaq: SNDK

WellPoint Inc NYSE: WLP

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.