Markets surge post-Fed; Evergy, PG&E convertibles gain; RingCentral unleashes buybacks

By Abigail W. Adams

Portland, Me., Dec. 13 – While the convertibles primary market remained dormant on Wednesday, the secondary space surged as the Federal Open Market Committee unveiled a new dot plot plan that confirmed market expectations for rate cuts in 2024.

Equities and Treasuries were muted ahead of the announcement and Fed chair Jerome Powell’s press conference. But they roared afterwards.

The Dow Jones industrial average closed Wednesday up 460 points, or 1.26%, the S&P 500 index closed up 1.22%, the Nasdaq Composite index closed up 1.15% and the Russell 2000 index closed up 2.52%.

Treasury yields plunged with the two-year falling 30 basis points to 4.43% and the 10-year falling 17.9 bps to 4.025%.

The secondary space was firm prior to the move in broader markets but was “rocking and rolling” afterward, a source said.

There was $106 million in reported volume about one hour into the session and $635 million on the tape about one hour before the market close with buyers active.

The market was in general lifted about 0.5 point dollar-neutral with the high-grade sector strong amid the move in Treasuries.

Longer-duration high-grade names were outperforming their lower-duration counterparts.

Evergy Inc.’s recently priced 4.5% convertible notes due 2027 (BBB) dominated the tape with the notes weak early in the session but pushed to new heights by the close.

PG&E Corp.’s 4.25% convertible notes due 2027 were also pushed to a new high in heavy volume.

Wayfair Inc.’s 3.5% convertible notes due 2028, one of the best performing deals of 2023, were on the rise as stock jumped double digits.

RingCentral Inc.’s 0% convertible notes due 2025 were active early in the session as the company unleashed more buybacks with the timing coinciding with the surprise exit of the company’s recently appointed CEO.

Evergy dominates

Evergy’s 4.5% convertible notes due 2027 continued to dominate the tape on Wednesday with the notes weak early in the session but hitting a fresh high as markets surged post-Fed.

The 4.5% notes were changing hands at 100.875 versus a stock price of $51.35 early in the session, according to a market source.

They shot up to 101.5 versus a stock price of $52.06 by the market close.

There was $76 million in reported volume.

Evergy’s stock traded to a low of $51.11 and a high of $53.39 before closing at $53.33, an increase of 3.86%.

The notes have seen heavy volume over the past week.

PG&E’s new high

PG&E’s new 4.25% convertible notes due 2027 also hit a fresh high on Wednesday.

The notes added 0.5 point outright to close the day on a 103-handle.

They were trading at 103.125 versus a stock price of $17.94 in the late afternoon, according to a market source.

There was $17 million in reported volume.

PG&E’s stock traded to a low of $17.65 and a high of $18.24 before closing at $18.15, up 2.37%.

Wayfair rises

Wayfair’s 3.5% convertible notes due 2028 shot higher on Wednesday as stock surged double digits in the broad market rally.

The 3.5% convertible notes rose 10 points outright with stock up 10%.

The notes were seen at 145 in the late afternoon.

There was $14 million in reported volume.

Wayfair’s stock traded between $50.19 and $57.98 before closing at $56.92, up 9.34%.

Wayfair’s 3.5% convertible notes due 2028 are among the best-performing deals of 2023.

The notes shot as high as double par in early August as stock raged to a new 52-week high of $90.71.

The convertible notes and stock have come in considerably since then. However, the deal remains among the year’s best performing.

Wayfair priced the $690 million issue at par in May.

RingCentral buyback

RingCentral’s 0% convertible notes due 2025 were active early Wednesday after the company engaged in more buybacks of the notes.

The 0% notes were up 2.5 points outright with several prints at 95 pre-open, a source said.

There was $7 million in reported volume.

RingCentral announced on Wednesday that it had repurchased $253 million of the 2025 notes for $240 million in cash.

The repurchase leaves $161 million of the notes outstanding.

RingCentral has been on an ongoing campaign to retire its 0% convertible notes due 2025, which was a $1 billion issue.

The company repurchased $461 million of the initial $1 billion issue for $425 million in cash in May.

It repurchased an additional $130 million in principal for $122 million in cash in August.

The additional convertible note buyback coincided with the company’s announcement that its CEO was leaving after a three-month stint.

RingCentral’s stock initially fell more than 1% following the announcement but was boosted back to positive territory in the market rally.

Stock closed Wednesday at $32.36, an increase of 2.6%.

Mentioned in this article:

Evergy Inc. Nasdaq: EVRG

PG&E Corp. NYSE: PCG

RingCentral Inc. NYSE: RNG

Wayfair Inc. Nasdaq: W

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