Convertibles primary market silenced by volatility; Airbnb, Ford near all-time lows

By Abigail W. Adams

Portland, Me., June 14 – It was another volatile day for the convertibles secondary space on Tuesday with equity markets choppy as the Federal Open Market Committee meeting kicked off.

Expectations for the Federal Reserve’s rate hike schedule have been revised drastically over the past two weeks with expectations for a pause in the second half of the year giving way to renewed expectations for a 75 basis point rate increase to be possibly announced on Wednesday.

The spectacular late-May rally in credit and equity markets gave way to a spectacular sell-off following the latest Consumer Price Index report.

The continued volatility in equities combined with a fast-approaching earnings season blackout have stalled primary market activity.

“Don’t expect any deals this week,” a source said.

While new deal activity is expected to remain muted until equity markets stabilize, there is a pipeline of deals in the works, a source said.

After several years of losing prospective issuers to the high-yield bond market, well-known names in junkbondland are starting to inquire about equity-linked financing.

“They’re appalled at how wide levels have gone,” a source said.

However, with the degree of uncertainty in markets, equities will need to stabilize before new deal activity resumes in full force.

Equities remained volatile on Tuesday with indexes wavering between gains and losses before closing mixed.

The Dow Jones industrial average was down 152 points, or 0.50%, the S&P 500 index closed down 0.38%, the Nasdaq Composite index closed up 0.18% and the Russell 2000 index closed down 0.57%.

There was $98 million in reported volume about one hour into the session and $419 million on the tape about one hour before the market close.

The market was a mixed bag following Monday’s weakness with some names improving while others trended lower.

Airbnb Inc.’s 0% convertible notes due 2026 were retesting their lows in active trading as stock hit an all-time low.

Ford Motor Co.’s 0% convertible notes due 2026 and Snap Inc.’s convertible notes were hovering near the all-time lows hit during the previous session in active trading on Tuesday.

Airbnb retests lows

Airbnb’s 0% convertible notes due 2026 were retesting their lows in active trading on Tuesday.

The 0% convertible notes were down about 0.5 point outright to an 82-handle.

They were changing hands at 82.5 early in the session with a yield of 5.375%.

While the notes were the most actively traded issue early in the session, activity in the issue diminished as the session progressed.

There was $10 million in reported volume heading into the market close.

Airbnb’s stock hit an all-time low of $97.20 on Tuesday before bouncing off its lows into positive territory.

Stock traded to a high of $101.35 before closing the day at $98.87, down 0.06%.

Airbnb’s 0% convertible notes last traded down to an 82-handle in the sell-off that preceded the release of the Federal Reserve’s minute notes in late May.

The notes jumped alongside the broader market to trade as high as 88. However, selling in the name resumed following last Friday’s release of the CPI report.

Ford’s new low

Ford’s 0% convertible notes due 2026 were hovering near their all-time lows with one of the best performing deals of 2021 now firmly below par.

The 0% notes were wrapped around 96 in active trading, a level the notes dropped to as stock tanked during Monday’s sell-off.

There was $12 million in reported volume.

Ford’s stock was on the rise on Tuesday after hitting a 52-week low during Monday’s session.

Stock traded to a high of $12.42 and a low of $11.91 before closing the day at $12.20, an increase of 3.3%.

Stock bounced after crashing more than 7% on Monday and setting a new 52-week low of $11.74.

The convertible notes closed the previous week above par.

The current level for the 0% notes is the lowest since the $2 billion issue priced at par in March 2021.

The notes were, at one time, the best performing deal to price in 2021 and closed the previous year with an outright price in the 130s.

Snap active

Snap’s convertible notes were also hovering near their all-time lows as stock again set a new 52-week low during Tuesday’s session.

Snap’s 0.125% convertible notes due 2028 continued to trade on a 69-handle, a level the notes sank to during Monday’s sell-off.

The 0.125% notes were trading just shy of 69.5 in the late afternoon with the yield now 6.648%.

There was $12 million in reported volume.

The social media company’s 0% convertible notes due 2027 remained wrapped around 71.

There was $7 million in reported volume.

Snap’s stock traded to a new 52-week low of $11.90 and a high of $12.52 before closing the day at $11.91, a decrease of 1%.

Stock has struggled since late May when the company slashed its revenue and profit forecasts citing deteriorating macro conditions.

Mentioned in this article:

Airbnb Inc. Nasdaq: ABNB

Ford Motor Co. NYSE: F

Snap Inc. NYSE: SNAP

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