Morning Commentary: Square convertibles active on quiet morning; Peabody gains continue

By Abigail W. Adams

Portland, Me., Feb. 28 – It was a quiet morning in the convertibles secondary space as equity markets traded mixed as investors digested the latest developments in the Ukraine.

The Dow Jones industrial average was down 233 points, or 0.69%, and the S&P 500 index was down 0.39% shortly before 11 a.m. ET.

After opening in negative territory, the Nasdaq Composite and Russell 2000 index turned positive about one hour into the session with the 10-year Treasury yield below the 1.9% threshold.

The Nasdaq was up 0.31% and the Russell 2000 was up 0.35% shortly before 11 a.m. ET.

There was $51 million in reported volume about one hour into the session.

Square Inc.’s 0.125% convertible notes due 2025 were active early in the session as stock continued its post-earnings rally.

The 0.125% notes climbed another 3 points outright with stock up more than 5%.

They were changing hands at 125.875 versus a stock price of $122.10 early in the session, according to a market source.

There was $6 million in reported volume.

Square’s convertible notes have been on a steady downtrend alongside stock with the fintech company among the high-growth momentum stocks getting hammered amid rising rates.

The notes traded as low as 108 last Wednesday as Square stock broke below $100 heading into earnings.

However, stock has been on an upswing since the company reported better-than-expected earnings and equities broke their rout.

While volume in the name was light, Peabody Energy Corp.’s 3.25% convertible notes due 2028 continued to gain on an outright basis their second day in the secondary space.

The notes traded as high as 110.125 early in Monday’s session.

However, the notes were moving in line on a dollar-neutral basis on a delta of 79%, a source said.

Peabody’s stock was changing hands at $17.54, an increase of 9.62%, shortly before 11 a.m. ET.

The notes saw a strong secondary market debut on Friday, closing the day at 106 and expanding 4 points dollar-neutral.

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