Morning Commentary: Western Digital active with short-duration, high yields in demand

By Abigail W. Adams

Portland, Me., Sept. 23 – The convertibles secondary space was active early in the session with equity markets poised to close the week with heavy losses.

Indexes saw heavy selling early in the session as a U.K. stimulus package stoked inflationary concern with bets increasing for more aggressive tightening from the Bank of England.

The Dow Jones industrial average was down 465 points, or 1.56%, the S&P 500 index was down 1.84%, the Nasdaq Composite index was down 1.75% and the Russell 2000 index closed down 2.80% shortly before 11 a.m. ET.

There was $74 million on the tape about one hour into the session with Western Digital Corp.’s 1.5% convertible notes due Feb. 1, 2024 (Baa3) seeing heavy volume.

The 1.5% notes were largely unchanged at 94.85 with the notes offering a yield of 5.526%, according to a market source.

The notes are not equity sensitive and have long traded for their yield.

There were two $5 million plus trades on the tape.

Short-duration notes offering a high yield have been in demand in the secondary space, a source said.

However, the yields must now compete with a two-year Treasury note yielding 4.2%.

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