U.S. convertibles narrowly mixed; new Team lifts 1.5 points on swap; AMD jumps on earnings

By Rebecca Melvin

New York, July 26 – U.S. convertibles were narrowly mixed on Wednesday with several semiconductor chip names higher and a new deal in the market, which edged upward, ahead of the latest U.S. Federal Reserve rate-setting decision released Wednesday afternoon.

The Fed decision, in which policy makers stood pat on interest rates and signaled moving ahead with reducing assets on its balance sheet “relatively soon,” did little to move convertibles, a New York-based trader said.

Several New York-based trading desks said they were short staffed on Wednesday, curtailing some of the session’s liquidity amid ongoing summer vacation schedules. But Team Inc.’s newly priced 5% convertibles traded up after the Sugar Land, Texas-based provider of specialty industrial services priced $200 million of the six-year senior notes at the midpoint of price talk.

Advanced Micro Devices Inc.’s convertibles gained with the underlying shares after the Sunnyvale, Calif.-based chipmaker reported positive quarterly results and several analysts boosted stock price targets.

One desk reported a flurry of technology name trades late in the day, including Intel Corp., Alibaba and different mandatory issues.

Based on Tuesday’s stock close, the new Team convertibles were up on a dollar-neutral, or swap, basis by 1.5 points if holders were on a 65% delta, according to a market source.

The Team bonds traded at 101.875 at late morning, according to Trace data. Team shares fell on the New York Stock Exchange, closing down 80 cents, or 5.2%, at $14.70.

AMD’s 2.125% convertibles due 2026 trading upward and were last seen at more than double par, or 208.6, according to Trace data. AMD shares, which were up more than 8% earlier in the session, closed higher by 65 cents, or 4.6%, to $14.76.

Microchip Technology Inc. saw a pair of its convertible issues in trade as its shares closed up $1.75, or 2.2%, at $82.60. The Microchip 2.25% convertibles due 2037 added 2 points outright to nearly 113 and the Microchip 1.625% convertibles due 2027 added 1.8 points outright to 113.5.

Also in technology, Vishay Intertechnology saw its 2.25% convertibles due 2041 trade up half a point to 108.6 against shares that dropped 30 cents, to $17.70.

Also seeing some trading action amidst wrangling among lawmakers in Washington on health care legislation was health care insurer Anthem. The straight repeal vote on the Affordable Care Act failed in the Senate 55-45 on Wednesday. Anthem said it needs to know more about the future of federal payments that help reduce out-of-pocket expenses for low-income ACA exchange-plan enrollees. Cost-sharing payments are needed to revise its rate filings to further narrow its level of participation, the company said.

Anthem’s 2.75% convertible due 2042 traded at 254.2, according to Trace data, against Anthem shares, which were down 3% to $184.99 on the day.

Meanwhile, WebMD Health Corp.’s convertible bonds remained in focus after news on Monday that the online medical information website is being bought out by private equity firm KKR & Co.

The WebMD 2.5% convertible notes due 2018 held steady around the 106 level during the session.

The WebMD 1.5% convertible notes due 2020 remained around 138; and the 2.625% convertible notes due 2023, which were less actively traded, were right below par.

KKR is buying out the firm for $66.50 a share, which was a 20.5% premium over the Friday closing share price.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Anthem Nasdaq: ANTM

MicroChip Technology Inc. Nasdaq: MCHP

Vishay Intertechnologies NYSE: VSH

Team Inc. NYSE: TISI

WebMD Health Corp. Nasdaq: WBMD

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