Odd and ends offered amidst slow, boring session; market looks to post-holiday primary

By Ronda Fears

Nashville, Aug. 27 - A few odds and ends were for sale in the convertibles market but not a lot of activity was noted by traders Wednesday. Traders said there were still some bids trickling in as well though they could not see a pattern in buying, either.

"Stocks were flat. Treasuries took another dip; that was a sloppy market today. So we just didn't do much at all. With bonds retracing, we're really looking for stocks to lead us," said the head convert trader at one of the bulge bracket firms.

"There were probably not as many bids out there as we've seen lately, a few more offers. Not a lot traded, though."

While the market is closely watching stocks for a cue, there is considerable trepidation with regard to bonds as well.

One manager at a hedge fund in New York commented: "After Labor Day, the U.S. Treasury is going to have to raise about $50 billion, just to keep things going. That's a big financing."

Many players were becoming bored with the lackluster secondary market and looking forward to capital-raising efforts in the convertible market after the holiday, too.

"We are bored to tears over here," said a buyside source. "I can't wait for Labor Day to be behind us."

Capital markets sources said it may be a slow start for the primary market after Labor Day, as next week will be a short one. But afterward, toward the middle of September, they believe new issues will resume a somewhat frenetic pace.

"Next week will probably be a little slow, still. There might be a deal announced and maybe an overnighter," said a senior capital markets source at one of the busier banks.

"We really won't get back into full swing until the second or third week of September. But, we think it's going to be pretty busy for the rest of the year. Companies that need to raise capital will be wise to do it now because the only place for [interest] rates to go is up."

Labor Day evokes back-to-school thoughts, and traditionally marks the end of summer vacations. Thus, with back-to-school season in full swing, there were some buyers noted for School Specialty Inc.'s converts. The book and school supplies firm's 6% due 2008 added 1.5 points on the day to 111.5 bid, 112.5 offered and the 3.75% due 2010 gained 1 point to 98.125 bid, 98.625 offered. The stock rose 67c, or 2.46%, to $27.88.

Otherwise, there were some pretty sharp stock moves - chiefly in tech names - that forced traders to re-mark converts.

"The highlight of our day was the closing bell finally ringing," one dealer said, with emphasis on "finally."

"Several issues were marked up pretty aggressively due to the stock moves," he said.

"Of course that doesn't really mean a lot, but it was something to do, you know."

Cypress Semiconductor Corp., Symantec Corp. and Computer Network Technology Inc. were all mentioned in that vein, with traders adding that there was little news on the tape to spark the gains.

Symantec saw a pop after USBancorp Piper Jaffray analyst said the recent virus and worm outbreaks are having a dramatic positive impact on the computer security firm's sales.

Beyond the December quarter, however, Piper Jaffray expects the potential launch of a competing product from Microsoft will likely weigh on Symantec.

Symantec shares climbed $2.10, or 3.87%, to $56.30. The 3% due 2006 gained 5 points on that move, to 167.25 bid, 168.25 offered.

Similarly, Computer Network Technology's 3% due 2007 shot up 4.5 points to 76.5 bid, 77.5 offered as the stock rose $1.02, or 15.5%, to $7.60.

Cypress shares gained $1.39, or 8.3%, to $18.13 amid strength in the chip sector, and the 1.25% convertibles due 2008 added 5.875 points to 129.5 bid, 130.5 offered.

Western Wireless Corp. also got a shot in the arm when Raymond James upped its target for the stock, but traders said the telecom and telecom equipment groups were widely mixed as Motorola Inc. was downgraded by Morgan Stanley due to valuation concerns.

The new Western Wireless 4.625% convertible due 2023 rose 4.375 points on the day to 138.375 bid, 139.375 offered, while the stock gained $1.26, or 7.35%, to $18.40.

One convert trader also noted a blurb that JMP Securities believes the current sell-off in Flir Systems Inc. stock represents a buying opportunity, and that could bode well for the convert. She said the company is seen well-positioned to benefit from an increase in defense spending and the eventual rebound in industrial markets.

Flir's new 3% convert due 2023 was quoted up 0.875 point to 93.5 bid, 94.5 offered with the stock closing up 29c, or 1.15%, to $25.59.

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