Morning Commentary: Convertible bonds trade down after Brexit vote; Tesla remains under pressure

By Stephanie N. Rotondo

Seattle, June 24 – The convertible bond market was following in line with the broader markets on Friday – that is, it was trading off on news the United Kingdom had voted to leave the European Union.

Still, the carnage was not untenable, at least according to one trader.

“There’s really no panic,” he said. He speculated that once European markets closed for the week, the U.S. markets “could totally reverse.” He also noted that in the European markets, the pain was being felt more outside of the U.K. than inside.

“The panic is in the rest of Europe,” he said.

As for the day’s dealings, Tesla Motors Inc.’s 0.25% convertible notes due 2019 continued to “follow the stock down,” a trader said.

He placed the bonds at 87.25. For its part, the equity (Nasdaq: TSLA) was off $3.43, or 1.75%, at $192.97.

The name has been pressured for the last several days, ever since Tesla’s Elon Musk said he wanted the automotive company to purchase SolarCity Corp., another company in which Musk has a stake. The bonds and stock have waned as the deal has not generated a lot of investor support.

Micron Technology Inc.’s paper was also on the weaker side. A trader said the 3% convertible notes due 2043 were trading “just under 75,” equaling a 4.5% yield to put in 2028.

That stock (Nasdaq: MU) was off 79 cents, or 6.3%, at $13.26 in mid-morning trading.

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