Morning Commentary: Yield plays eyed in convertibles secondary space; Pinduoduo lower

By Abigail W. Adams

Portland, Me., March 20 – It was a quiet morning in the convertibles secondary space as markets digested the latest developments in the banking sector.

Equity markets opened Monday mixed but were lifted into positive territory as the session progressed.

Investors were eyeing UBS’s emergency buyout of Credit Suisse and questioning the deal’s ability to stymie further contagion in the banking sector, especially as First Republic Bank’s stock sank in early trading.

The Dow Jones industrial average was up 334 points, or 1.05%, the S&P 500 index was up 0.76%, the Nasdaq Composite index was up 0.24% and the Russell 2000 index was up 1.66%.

There was $57 million in reported volume about one hour into the session with yield plays dominating the tape.

Western Digital Corp.’s soon-to-mature 1.5% convertible notes due Feb. 1, 2024 (Baa3) saw large trades early in the session.

The 1.5% notes were changing hands at 96.375 with a yield 5.89%, according to a market source.

There was $9.5 million in reported volume with four trades on the tape.

The 1.5% notes have long been a yield play with the yield on the notes more attractive due to the rate rally over the past two weeks, a source said.

Pinduoduo Inc.’s 0% convertible notes due 2025 also saw heavy volume with the notes lower as its equity fell double digits following earnings.

The 0% notes were off about 0.25 to 0.5 point outright.

They were changing hands at 94.75 with the yield 7.95% in early trading, according to a market source.

There was $8 million in reported volume.

The notes have traded on a 95-handle for the past month as their Dec. 1, 2023 put date draws closer.

While the notes are largely a yield play, Pinduoduo’s American Depositary Shares sank after disappointing earnings.

The Shanghai-based e-commerce company’s ADSs were trading at $81.86, a decrease of 10.96%, shortly before 11 a.m. ET.

© 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.