Convertibles mostly in line with lower shares; gold names in focus; Isis edges up on hedge

By Rebecca Melvin

New York, Sept. 23 - Convertible bonds were seen trading mostly down in line with weaker underlying shares on Monday. Volume was light.

A few gold names were in focus, moving in tandem with gold prices, which ended the day lower. Goldcorp Inc.'s 2% convertibles due 2014 were seen at 101.25. The Newmont Mining Corp. 1.625% convertibles due 2017 traded at 111.568, and the B2Gold Corp. 3.25% convertibles due 2018, of which $225 million priced in August, were seen last at 96.25 bid, 97 offered versus a share price of $2.52, although those bonds hadn't traded on Monday.

"It seems like a very sleepy Monday," the sellsider said early in the session.

Elsewhere, Isis Pharmaceuticals Inc., which also priced convertibles in August, saw those bonds trade higher on an outright basis and improve on a dollar-neutral, or hedged, basis after the Carlsbad, Calif.-based drug company announced positive phase 2 trial data of its ISIS-APOC3 drug to treat high triglycerides. BMO Capital raised its price target on the Isis shares, keeping its "outperform" rating on the shares.

MGIC Investment Corp.'s 9% convertibles were also in trade, and those were unchanged on a dollar-neutral basis at 109 bid, 111 offered, a New York-based trader said.

There were no discernible trends, the trader said. "It was very, very quiet."

Cemex SAB de CV's 4.875% convertible was among the top-volume names, and it slipped on an outright basis, changing hands at 120.5 bid, 121 offered compared to trades late Friday at 121 and 121.5. Shares of the Monterrey, Mexico-based cement producer were little changed.

The broader markets extended losses on Monday, with the S&P 500 stock index slipping another 8.07 points, or 0.5%, to 1,701.84, after losing 12.43 points on Friday; the Dow Jones industrial average ended down 49.71 points, or 0.3%, to 15,401.38, after stumbling 185.46, points on Friday; and the Nasdaq stock market lost 9.55 points, or 0.3%, to 3,765.29, after losing 14.66 points on Friday.

It was the third straight day of declines for equities, but the S&P 500 market is still up 4.2% for September and 19% for the year to date.

Goldcorp trades

Goldcorp's 2% convertibles due August 2014 traded at 101.25 during the session, with the underlying shares higher at $25.93.

Later, shares slipped into negative territory, ending down 31 cents, or 1.2%, to $25.51.

A month ago, the Goldcorp 2% convertibles traded at 102.3 versus a share price of $29.91.

"It's a gold play, so it moves with the price of gold on any given day," a New York-based trader said.

The price of gold moved down $4.70, or 0.4%, an ounce for December 2013 delivery to $1,322.30 on the Comex.

Newmont Mining's 1.625% convertibles due 2017 traded at 111.6 on Monday.

Isis bonds up

Isis Pharmaceuticals' 2.75% convertibles due 2019 were seen at 238.75 bid, 239.25 offered at the end of the session with the stock at $38.48.

"They traded a bunch of times in that range," a New York-based trader said.

That price level represented an improvement on a dollar-neutral basis of 0.125 point.

Shares gained $2.48, or 6.7%.

"They had positive data of a phase 2," the trader said.

The data of ISIS-APOC3 showed substantial reductions of triglycerides in patients with familial chylomicronemia syndrome, which is a rare orphan disease characterized by severely high triglyceride levels that affects an estimated 3,000 to 5,000 patients worldwide.

BMO raised its price target on Isis shares to $43.00 from $36.00, the trader said.

MGIG 9s unchanged on hedge

MGIC's 9% convertibles due 2063 traded at 109 bid, 111 offered, a trader said, calling the debentures unchanged on a hedged basis.

Shares of the Milwaukee-based mortgage insurer traded down 20 cents, or 2.7%, at $7.27.

"Somebody had a seller," the trader said. His firm hadn't traded the other MGIC convertibles including a 2% convertible due 2020 and a 5% convertible due 2017.

Mentioned in this article:

B2Gold Corp. NYSE: BTG

Cemex SAB de CV NYSE: CX

Goldcorp Inc. NYSE: GG

Isis Pharmaceuticals Inc. Nasdaq: ISIS

MGIC Investment Corp. NYSE: MTG

Newmont Mining Corp. NYSE: NEM

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