Morning Commentary: Convertibles little moved in light volume; Pinduoduo, Broadcom eyed

By Rebecca Melvin

New York, Sept. 27 – Convertibles were seen little changed on light trading volume early Friday as a somewhat weaker tone persists in the wake of a flood of issuance over the past month.

Total volume was light at late morning with about $100 million of bonds seen to have traded, according to Trace data, a New York-based market source noted.

Of that, Pinduoduo Inc.’s $875 million deal of 0% five-year convertible notes, which priced earlier this week, accounted for about $8 million of volume and was the leading name on the volume list.

The leading mandatory convertible in trade was Broadcom Inc.’s $3.25 billion of 8% mandatory convertible preferred shares, which also priced this past week, and NextEra Energy Partners LP’s $1.5 billion of 4.872% mandatories that priced earlier in September was also active.

Broadcom’s preferred was quoted at 104.5 bid, 104.5 offered with the common stock at $280.50.

“I think the deal did very, very well, with the underwriters placing about two-thirds of it with outrights,” the source said regarding Broadcom.

New issues persist in dominating secondary market trading, the market source said.

There has been more than $10 billion in new U.S. convertibles issuance for September so far in 21 deals, which is more than double September 2018 when $5.3 billion priced in eight deals, according to Prospect News’ data.

Issuance for the year so far is also now above the same period last year, with total issuance standing at $46.48 billion in 106 deals, compared to $45.08 billion for the same period of 2018, according to Prospect News’ data.

High-yield debt is also tracking ahead of last year with investment-grade issuance about even with last year, a market source said.

Looking ahead, market players will be watching index rebalancing next week that marks month end and the start of earnings season in mid-October. That will likely be the next big catalyst, the source said.

© 2015 Prospect News.
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