Convertibles secondary firm; YY in focus; Chesapeake Energy active; Intercept comes in

By Abigail W. Adams

Portland, Me., July 10 – The convertibles secondary space was active on Wednesday with equity markets strong following comments from Federal Reserve chairman Jerome Powell, which signaled support for a July rate cut.

The overall space saw increased buying activity, much of which appeared to be driven by additions and subtractions to indexes, a market source said.

YY Inc.’s recently priced 0.75% convertible notes due 2025 and 1.375% convertible notes due 2026 were among the major volume movers in the secondary space with both issues on the verge of being added to the Thomson Reuters Convertible Indices.

With the oil patch strong on Wednesday, Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 also saw a fresh round of trading activity with the notes improving as crude oil futures jumped.

While volume was light on Wednesday, Intercept Pharmaceuticals Inc.’s 2% convertible notes due 2026 were coming in on an outright and dollar-neutral basis as stock sold off.

While trading activity dwindled into the afternoon, Intel Corp.’s 3.25% convertible notes due 2039 were among the most active issues early in the session as stock popped alongside the broader market.

YY in focus

YY’s two tranches of convertible notes were among the most actively traded issues in the secondary space during Wednesday’s session with the notes trading down alongside the company’s equity.

YY’s 0.75% convertible notes due 2025 traded up to 102.25 early in the session but came in to close the day around 101.375.

More than $8 million of the bonds were on the tape by the late afternoon.

YY’s 1.375% convertible notes due 2026 also traded as high as 102.5 early in the session but came in to trade just south of 101 in the afternoon.

The notes saw more than $14 million in volume by the late afternoon.

The Guangzhou, China-based global social media platform’s equity traded to a high of $71.63 and a low of $68.635 before closing the day at $69.47, a decrease of 1.01%.

Both tranches of YY’s convertible notes will be added to the Thomson Reuters Convertible Indices on Thursday.

Chesapeake Energy improves

Chesapeake Energy’s 5.5% convertible notes due 2026 were active on Wednesday as crude oil futures marked their best day in nearly seven weeks.

The 5.5% notes were changing hands between 76 and 76.625 on Wednesday.

The notes trade for their yield which was around 10.25%, a market source said.

The energy sector was lifted on Wednesday alongside the overall market as crude oil futures jumped on the heels of a report that reflected a larger than anticipated drop in U.S. inventory.

The barrel price of WTI crude oil for August delivery jumped to $60.34, an increase of $2.51 or 4.34%, by the late afternoon.

Intercept comes in

While volume was light on Wednesday, Intercept’s 2% convertible notes due 2026 dropped on both an outright and dollar-neutral basis as stock sold off amid mixed reports about the marketability of one of its products.

The 2% convertible notes traded down 3 points outright to 96.75.

They came in about 0.25 point dollar-neutral, a market source said.

Intercept stock traded to a low of $73.21 before closing the day at $74.14, a decrease of 7.06%.

Stock has seen a large fluctuation as reviews over its treatment for NASH, or nonalcoholic steatohepatitis, a liver disease, have received mixed reviews.

The treatment is up for FDA approval with the general consensus that it will be approved.

However, data from its phase 3 study failed to impress investors with stock selling off after the data’s release.

There is disagreement among analysts about the prospects for the new treatment with some calling into question its profitability and others claiming the market is undervaluing the company.

Intel on the tape

While trading activity diminished into the afternoon, Intel’s 3.25% convertible notes due 2039 were active as stock jumped early in the session.

The notes were changing hands at 234 with about $5 million in reported volume about one hour into Wednesday’s session, according to a market source.

At more than double par, the 3.25% notes were an equity trade, the source said.

Intel stock traded as high as $48.61 on Wednesday but closed the day at $48.21, an increase of 0.96%.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Intel Corp. Nasdaq: INTC

Intercept Pharmaceuticals Inc. Nasdaq: ICPT

YY Inc. Nasdaq: YY

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