Morning Commentary: Microchip convertibles pop post-earnings; Zillow in decline; Nabors active

By Stephanie N. Rotondo

Seattle, Feb. 8 – Earnings news remained a key driver of convertible debt in early midweek trading.

At mid-morning, Microchip Technology Inc.’s 1.625% convertible notes due 2025 were dominating all trading, as the company came out with quarterly results late Tuesday that topped expectations.

In fact, the results were so much better than expected that trading in the company’s stock (Nasdaq: MCHP) had to be halted after-hours.

In early dealings on Wednesday, the convertibles were up 10 points or more, according to market sources.

One trader noted that at 148, the convertibles were trading with a 30-point premium.

The equity was up $5.25, or 7.55%, at $74.87.

Zillow Group Inc.’s 2% convertible notes due 2021 were meantime off 3 to 4 points outright in the wake of its own earnings release.

The results did beat expectations, though the online real estate company also posted a wider loss.

The 2% notes were pegged in a 100.75 to 101 range at mid-morning. The underlying shares (Nasdaq: Z) declined $2.51, or 6.81%, to $34.36.

Away from earnings-driven names, Nabors Industries Ltd.’s 0.75% convertible notes due 2024 were unchanged but active, a trader said.

The trader pointed out that at current levels between 99.5 and 99.75, the paper “amazingly” was trading with a 61% premium.

The stock (NYSE: NBR) was up 6 cents to $15.51.

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