Morning Commentary: Markets heavy post-CPI; Super Micro convertible notes in focus

By Abigail W. Adams

Portland, Me., April 10 – While the convertibles primary market remained dormant on Wednesday with sources expecting another paperless week, the secondary space saw an uptick of activity as the latest Consumer Price Index report crashed expectations for a June rate cut.

The secondary space was heavy early Tuesday with heavy selling in equities and Treasuries as markets braced for a higher-for-longer rate environment after a hotter-than-expected CPI print.

While indexes pared their losses from heavy selling at the open, they remained in the red with the Dow Jones industrial average down 345 points, or 0.89%, the S&P 500 index down 0.83%, the Nasdaq Composite index down 0.90% and the Russell 2000 index down 1.92% shortly before 11 a.m. ET.

The two-year Treasury yield shot up 18 basis points to 4.94% and the 10-year yield 13 bps to 4.5%.

There was $130 million in reported volume about one hour into the session with high-grade names seeing selling pressure amid the rate move.

However, Super Micro Computer Inc.’s 0% convertible notes due 2029 were the top trader early in the session with topical news bolstering the notes and stock.

The 0% notes were largely unchanged in active trade and were changing hands at 104.625 early in the session, according to a market source.

There was $20 million in reported volume.

Super Micro’s stock was trading at $903.66, a decrease of 0.06%, shortly before 11 a.m. ET.

Stock ricocheted between gains and losses early in the session after the company announced a new collaboration to develop a smart city solutions platform.

Rexford Industrial Realty, LP’s two tranches of exchangeable notes (Baa2/BBB+/BBB+) were also active with the notes under pressure alongside other high-grade names.

Rexford’s 4.375% exchangeable notes due 2027 were down 1 point outright to trade at 100.375 early in the session, a source said.

There was $4 million in reported volume.

The 4.125% exchangeable notes due 2029 were down 1.25 points outright to trade at 100.25.

There was $12 million in reported volume.

Rexford’s stock was trading at $47.90, a decrease of 3.04%, shortly before 11 a.m. ET.

The exchangeable notes were the among the last deals to clear the primary market with the $500 million tranches pricing at par on March 26.

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