Amgen, Medtronic, Transocean trade in high volumes; ProLogis mixed; Ford price fluctuates

By Rebecca Melvin

New York, July 1 - Trading volume in the convertible bond market held about steady on Thursday compared to Wednesday, but the action felt like it was winding down going into the July 4 holiday weekend, market players said.

"Tomorrow we'll have jobs data, and then about an hour and a half of trading, and that will be it," a New York-based buyside trader said looking ahead to Friday's session.

Markets are closed Monday for Independence Day, and many market players were starting their long weekend early.

Convertible trading volume was concentrated in four top-trading names, including Amgen Corp., Medtronic Inc., Transocean Ltd. and ProLogis, a New York-based sellside trader said.

Of ProLogis, "there were buyers of the new, and sellers of the old," a New York-based trader said.

The four names are the liquid, higher-rated issues of the convert universe, but they are also names in sectors that are being watched closely by convert arb investors. Financials, biotechs and health care names are in focus, especially in light of how the bonds are "acting" right now in that they have been holding in despite weakening shares. Such was not the case in 2008, sources say ruefully.

"Converts are starting to behave a lot better. You can make money with converts in a crazy market; it didn't work in '08, but we're seeing a more natural state for the market now," the buysider said.

Equities sink

The equity markets were down for yet another session - their eighth loss in nine sessions - amid disappointing economic data, although they ended off their lows. One source said he heard there was some short covering.

Trading in the Ford Motor Co. convertibles quieted after frenetic trading Wednesday, but the Ford convertible bonds and preferred shares continued to move back and forth.

On Wednesday word that the Dearborn, Mich.-based automaker was cutting its debt and reinstating a dividend on the Ford 6.5% convertible trust preferreds spurred action.

Meanwhile, on Thursday, Ford and most other U.S. carmakers reported that auto sales slowed more than expected in the past month as consumer confidence waned.

There was also lower pricing on Microsoft Corp., which saw its 0% convertibles slip to the 98 handle from 99 Wednesday amid shares that were weaker in the early going but closed in positive territory.

Ciena Corp. saw its long-dated 0.875% convertibles due 2017 trade down a bit to 60 from 61. The Ciena 0.875% notes traded at 60 versus a share price of $12.25.

Transocean Ltd. was mostly higher though in line with higher common shares.

The Dow Jones Industrial Average shed another 41.49 points, or 0.4%, settling at 9,732.53 on Thursday; the Nasdaq Stock Market lost 7.9 points, or 0.4%, to 2,101.36; and the S&P 500 index slipped another 3.34 points, or 0.3%, to 1,027.37.

Ford paper active

Ford's newer 4.25% convertibles due 2016 looked to have ended the session at 128.5, according to Trace data, after having traded at 124.75 versus a share price of $10.10 during the session, according to a sellsider.

That compared to Wednesday trades at 128 versus a share price of $10.40 and Tuesday trades at 123.5 versus a share price of $10.00.

The Ford 6.5% convertible trust preferreds looked to be about 40.5 on Thursday, after trades at 41 bid, 41.25 offered on Wednesday.

Shares of the Dearborn, Mich.-based automaker ended higher by 49 cents, or nearly 5%, at $10.57.

On Wednesday Ford was the big trade after word that the automaker was reinstating its dividend on the preferreds this month after suspending it a year and a half ago when the company feared imminent financial collapse.

On Thursday, the convertibles were pretty quiet, a New York-based buysider said.

"All along Ford should have provided the dividend and we knew it was coming, and finally they turned it on," the buysider said. "Our view was they would want to turn on the dividend in six to nine months, so they did it earlier, which is good."

On Thursday new car sales data turned the spotlight once again to a stalled economic recovery.

Sales of new cars and trucks for General Motors Co., Ford Motor Co., Toyota and Chrysler Group LLC all fell between 12% and 14% from May to June.

Ford said fleet sales accounted for about 37 percent of its overall sales in June, including 14 percent of its sales that went to car rental agencies.

On the annualized basis, U.S. auto sales slipped to 11.08 million vehicles in June, down from 11.6 million in May and below the 11.15 million average of the first half, according to industry tracking firm Autodata.

Mentioned in this article:

Amgen Corp. Nasdaq: AMGN

Ciena Corp. Nasdaq: CIEN

Ford Motor Co. NYSE: F

Medtronic Inc. NYSE: MDT

Microsoft Corp. Nasdaq: MSFT

ProLogis NYSE: PLD

Transocean Ltd. NYSE: RIG

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