Morning Commentary: Vipshop gains in active trade after earnings; Illumina’s strength persists

By Rebecca Melvin

New York, Aug. 16 – Market activity in U.S. convertibles was generally light and typical of an August day, a New York-based trader said Tuesday.

Vipshop Holdings Ltd.’s 1.5% convertible, which is part of the China internet sector that is not everyone’s cup of tea, was the top volume name in trade, according to Trace data, and those bonds were between 0.625 point to a point higher, following a much better-than-expected quarterly earnings report from the Guangzhou, China-based online discount retailer.

The Vipshop bonds were trading around 108.5 to 109.5 with the American Depositary Shares of the company, which underlie the bond, little changed in early action. The bonds had traded around 107.5 on Monday.

Higher sales pushed Vipshop revenue up 49% year over year and were behind the positive earnings report.

Also a focus in the market was the Illumina Inc. 0% convertible. Those bonds were trading better on continued momentum, a New York-based trader said.

“The Illumina 0’s have had a good run of late as the stock side has gone from $162.00 to $173.00 in the last week post earnings,” the trader said.

On Tuesday, the bonds were quoted at 103.25 bid, 103.75 offered versus an underlying share price of $173.20, which was basically unchanged from a dollar-neutral, or swap, perspective.

But the Illumina bond, which trades on a small, 35% delta is up about 2 to 3 points in the last 1.5 weeks from about par, the trader said.

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