Morning Commentary: Convertibles market braces for volatile week; U.S. Steel notes tank

By Abigail W. Adams

Portland, Me., March 16 – The convertibles secondary space was bracing itself for another volatile week with volume light on Monday as equity trading was again halted after the S&P 500 index hit its limit-down circuit breaker shortly after the opening bell.

When trading resumed, indexes extended their losses with the Dow Jones industrial average down 8.31%, the S&P 500 down 7.69% and the Nasdaq composite down 7.83% shortly before 11 a.m. ET.

There was $33 million in reported volume about one hour after the opening bell with few names seeing concentrated trading activity.

Microchip Technology Inc.’s 1.625% convertible notes due 2027 were the most actively traded name early in the session with the notes tumbling below par.

The 1.625% notes dropped more than 1 point outright to trade just shy of 99 versus a stock price of $62.55, according to a market source.

The bonds saw more than $5 million in reported volume about one hour into the session.

Microchip stock was changing hands at $65.30, a decrease of 6.67%, shortly before 11 a.m. ET.

The level was the lowest outright price for the notes since the market rout of October 2018.

U.S. Steel Corp.’s 5% convertible notes due 2026 tanked in early trading.

The 5% notes dropped more than 9 points outright to trade on a 60-handle, according to a market source.

U.S. Steel’s stock was $5.02, a decrease of 7.39%, shortly before 11 a.m. ET.

The notes have crumbled in the market sell-off over the past two weeks.

They were trading in the low 90s the first week of March, according to Trace data.

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