Convertibles quiet, flat as financial markets reopen after devastating storm; AMD in line

By Rebecca Melvin

New York, Oct. 31 - The convertible bond market didn't start out with a bang Wednesday despite the potential for pent up demand following closure of U.S. stock and bond markets Tuesday and part, or all of, Monday due to Hurricane Sandy.

"There were no significant moves, and the general tone was lackluster," a New York-based trader said of Wednesday's convertible bond market.

The majority of trading was conducted by long-only accounts doing marginal trimming and adding to positions in typical month end-related action.

But this month end, which was also Halloween, was even quieter than usual, the trader said.

He anticipated that market action would pick up Thursday and Friday in tandem with the resumption of commuter transportation services in the New York metropolitan area.

A second trader also said the market was quiet and flat, and that "many people are working from home or not at all."

New York was struggling to restart commuter train and subway services after closing and a subsequent pummeling from Sandy that caused flood and wind damage to some sections.

There were also connectivity issues and poor cell phone service in parts of the region Wednesday limiting market participants, according to reports.

Sandy came ashore in New York and New Jersey with up to 90-mile-per-hour winds and record storm surges.

Advanced Micro Devices Inc.'s 6% convertibles were one of the day's high-volume names, and they traded "in line" with where they had been at about 93.

The bonds of the Sunnyvale, Calif.-based chipmaker bounced off their lows last week after sliding since the week before when the company missed estimates.

Volume reported by Trace data looked to be about $260 million of bonds changing hands, with AMD and its larger rival Intel Inc. accounting for a good chunk of that trade.

Intel's sister convertibles appeared mixed to lower with the underlying shares down more than 1%.

MGM Resorts International changed hands flat to higher despite lower shares after the Las Vegas-based casino operator reported a wider-than-expected quarterly loss.

Knight Capital Group Inc. was not seen in trade after the Jersey City, N.J.-based electronic trading firm released a note to clients saying it was taking no new orders Wednesday afternoon due to a generator issue that caused the company to lose power.

Knight's post-Sandy issue, reminiscent of its summer trading debacle that cost the firm $440 million, sent the underlying shares into a free fall temporarily, but shares recovered to end up a penny, or 0.4%.

The Knight convertibles were seen little changed at 91.875 bid, 92.25 offered, according to a New York-based trader.

Equities erased early gains to end mostly lower. The Dow Jones industrial average closed down 10.75 points, or 0.08%, at 13,096.46, and the Nasdaq composite stock index shed 10.72 points, or 0.4%, to 2,977.23, while the S&P 500 stock index closed up less than a point at 1,412.16.

AMD trades actively, flat

AMD's 6% convertibles due 2015 traded at 93 and 93.25, which was little changed on the day.

AMD shares ended the day down 2 cents, or almost 1%, at $2.05 in light volume.

The convertible bonds have been an active trader in recent sessions since they fell from par or slightly above par following the company's disappointing earnings report.

In a self-proclaimed bold strategic move, AMD announced Monday that it will begin developing a new type of chip with an aim toward capturing sales in the growing mobile device market.

Until now the company has made chips using a technology known as x86, which are used in computers but not often for mobile devices. AMD says the new chips are planned to be released beginning in 2014.

AMD 6s and Intel's convertibles were top names on the volume charts Wednesday, a trader said.

"They were in line from the other day, nothing exciting," a trader said of AMD pricing.

But market sources said not much was going on at all as there were still skeleton crews on many New York trading desks.

A West Coast-based trader said brokers were out and not much was trading.

Meanwhile talk regarding a possible delay of Friday's jobs report was dispelled after word from the Labor Department that it would release the October U.S. non-farm payrolls report on schedule Friday despite the fact that Hurricane Sandy caused government offices to be closed for two days this week.

MGM steady to higher

MGM's 4.25% convertibles due 2015 traded at 102.25 bid, 102.625 offered versus an underlying share price of $10.25 on Wednesday, according to a New York-based trader.

The amount was flat to higher compared to previous sales.

MGM shares fell 37 cents, or 3.5%, to $10.22 in active volume.

The company reported a wider-than-expected loss of $181.2 million, or 37 cents a share, compared with a year-earlier loss of $123.8 million, or 25 cents a share.

The most recent quarter saw a drop in tax benefits and soft demand in Las Vegas, while the year-earlier quarter included a large tax gain.

Excluding one-time items, the company posted a loss of 23 cents per share, compared to the 17 cents per share loss that was expected.

Revenue rose 1% to $2.3 billion.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Intel Inc. Nasdaq: INTC

Knight Capital Group Inc. NYSE: KCG

MGM Resorts International NYSE: MGM

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