Morning Commentary: Intel call news hits the market, dominates trading activity

By Abigail W. Adams

Portland, Me., Nov 17 – Intel Corp.’s Thursday night announcement that it will call its 2.95% convertible note due 2035 has shaken a market where the bond has been a mainstay of trading in recent weeks.

“Having this Intel bond called really takes something away from the convertibles market,” a market source said.

The company’s convertibles were responsible for $190 million of the $269 million in trades on Friday morning, sources said.

While the redemption of the full $1.6 billion convertible note will further detract from a shrinking convertible market, sources were not surprised by the company’s decision.

“That’s a high coupon nowadays,” a market source said. The yield was standard when the deal was priced in 2005.

Intel is a household name and the liquidity of its stock has carried over to the liquidity of its bonds, making it easy to set up a market-neutral hedge, a source said.

The note was trading 2.25 points below parity in the morning session, a market source said, with trades in the 167.625 range versus a stock price of $45.02, a decrease of about 1.47%.

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