Morning Commentary: Convertibles secondary market remains quiet as equities rebound

By Abigail W. Adams

Portland, Me., Dec. 11 – The convertibles secondary space again saw light trading volume early in Tuesday’s session as equity markets opened the day strong.

The Dow Jones industrial average opened Tuesday with a nearly 300-point gain although it quickly came in and was up 124 points shortly before 11 a.m. ET.

The tech sector and auto industry helped buoy the rise in equities on Tuesday with the stock of several convertible issuers stronger on news China is moving forward with tariff cuts on imported automobiles.

However, there were few names that saw more than $3 million in trades and even fewer with price movements, a market source said about one hour after the opening bell.

Palo Alto Networks Inc.’s 0.75% convertible notes due 2023 were among the volume movers with a “whopping” $2 million on the tape, a market source said.

The notes were up about 1 point on an outright basis to trade just south of 98. They were moving largely in line dollar-neutral, the source said.

Palo Alto’s stock jumped as much as 5% early Tuesday as the broader markets rallied. Stock was $184.72, an increase of 3.06%, shortly before 11 a.m. ET.

While the overall market was strong, CalAmp Corp.’s 2% convertible notes due 2025 saw movement in the opposite direction as stock tanked early in the session.

The notes dropped about 5.5 points outright to 80.75 in light volume early Tuesday.

CalAmp stock was down to $14.50, a decrease of 14.66%, shortly before 11 a.m. ET.

Stock hit a new 52-week low on Tuesday after the tech company focused on telematics revised its third-quarter guidance after the market close.

Guidance was reduced to non-GAAP earnings per share of 23 cents from 25 cents. The consensus estimate was for earnings per share of 32 cents.

The company is estimated to report earnings on Dec. 20.

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