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Morning Commentary: Convertibles secondary activity opens week at a crawl; Sea trades
By Abigail W. Adams
Portland, Me., Aug. 28 – The convertibles secondary space was barely awake early Monday with little expected from the week with large swaths of the market expected to turn the Labor Day weekend into an extended holiday.
While equity indexes were strong early Monday, it inspired little movement in the secondary space.
The Dow Jones industrial average was up 196 points, or 0.57%, the S&P 500 index was up 0.37%, the Nasdaq Composite index was up 0.38% and the Russell 2000 index was up 1.17% shortly before 11 a.m. ET.
There was $35 million on the tape shortly before 11 a.m. ET with no name seeing more than $3 million in reported volume and little price movement in the names that did trade.
Sea Ltd.’s 0.25% convertible notes due 2026 were among the most active names in the space with $3 million in reported volume.
The notes continued to trade on a 79-handle, a level they have maintained since the company’s equity plunged mid-August following a large earnings miss.
The 0.25% notes were changing hands at 79.25 early in the session with the yield about 8%, according to a market source.
The long-busted convertible notes are not equity sensitive and trade for their yield.
However, Sea’s American Depositary Shares were trading at $37.18, an increase of 2.79%, shortly before 11 a.m. ET.
While strong on Monday, Sea’s equity has plunged more than 50% since reporting earnings on Aug. 15.
However, the 2026 convertible notes have held at their bond floor with the notes only falling about 1 point outright.
They were trading on an 80-handle headed into their earnings report, according to Trace data.
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