Morning Commentary: Convertibles firm, but market pauses after volatile week; DryShips up

By Rebecca Melvin

New York, Oct. 24 – Convertibles remained firm but quieted on Friday from the hectic and volatile pace of the week overall, a New York-based trader said.

“There is good two-sided flow, with buyers outnumbering sellers. But I think people are taking a breath right here after one of the more active and volatile weeks that we’ve seen,” the trader said.

DryShips Inc.’s 5% convertibles, which mature Dec. 1, gained another point to 99.5 after the Athens-based shipping company announced that is priced $350 million in an equity offering, or 250 million shares of common stock at $1.40.

The equity raise boosted the convertibles, which sank to 90 last week as investors worried about the bonds’ payout, but shares slid 22% on the news.

Ford Motor Co.’s convertibles, which have been called, were seeing “small trading,” with buyers waiting in the wings if sellers emerge.

Ford 4.25% convertibles due 2016 traded at 161.8, which was down more than 4 points, according to Trace data.

Ford shares were down 52 cents, or 3.7%, at $13.88 after the company reported lower quarterly profit that beat estimates. Revenue was off 3%.

BioMarin Pharmaceutical Inc.’s convertibles popped on an outright basis, according to Trace data, after the California-based biopharmaceutical company reported earnings that beat estimates but missed on revenue. The company also raised full-year revenue below consensus. Shares jumped 7% to 8% in the early going.

BioMarin’s 1.5% convertibles due 2020 traded up nearly 5 points to 116, according to Trace data.

BioMarin’s 0.75% convertibles due 2018 traded up 4 points to 112.875. BioMarin shares gained $5.64, or 7.5%, to $80.68.

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