Zscaler convertibles rebound outright; Square notes active; Peabody gains continue

By Abigail W. Adams

Portland, Me., Feb. 28 – It was a relatively quiet day in the convertibles secondary space as equity markets wavered between gains and losses before closing mixed.

The Dow Jones industrial average was the only index to remain negative throughout Monday’s session although it closed off the session lows.

The Dow closed the day down 166 points, or 0.49%.

After briefly turning positive, the S&P 500 index closed the day down 0.24%.

The Nasdaq Composite and Russell 2000 index wavered between gains and losses before late-day buying pushed them into positive territory.

The Nasdaq Composite closed the day up 0.41% and the Russell 2000 index closed the day up 0.37%. The 10-year Treasury yield fell below the 1.9% threshold, closing the day at 1.832%.

There was $51 million in reported volume about one hour into the session and $350 million on the tape about one hour before the market close.

Zscaler Inc.’s 0.125% convertible notes due 2025 pared their losses alongside stock following Friday’s post-earnings sell-off.

Square Inc.’s 0.125% convertible notes due 2025 were also active and gaining outright as stock continued its post-earnings rally.

Peabody Energy Corp.’s 3.25% convertible notes due 2028 continued to gain on an outright basis their second day in the secondary space, although the notes were largely unchanged dollar-neutral.

Zscaler pares losses

Zscaler’s 0.125% convertible notes due 2025 pared their outright losses as stock rebounded following a post-earnings sell-off.

The 0.125% notse rose almost 8 points outright with stock up almost 8%.

The notes were changing hands at 168.5 versus a stock price of $234.41 early in the session.

They traded at 169.5 versus a stock price of $237.60 in the late afternoon.

There was more than $12 million in reported volume.

Zscaler’s stock traded to a low of $227.16 and a high of $244.95 before closing the day at $239.15, an increase of 7.8%.

While up on Monday, stock fell about 16% on Friday after the cyber-security company reported earnings.

While earnings beat estimates, stock plunged on disappointing guidance. The 0.125% convertible notes traded down to the low 150s on Friday.

However, cybersecurity stocks have returned to vogue following Russia’s invasion of the Ukraine.

Square notes in focus

Square’s 0.125% convertible notes were on the rise on an outright basis as stock continued its upward momentum.

The 0.125% notes climbed about 3 points outright with stock up more than 6%.

They were changing hands at 125.875 versus a stock price of $122.10 early in the session.

The notes rose to 126.75 versus a stock price of $125.66 in the late afternoon, according to a market source.

There was $11 million in reported volume.

Square’s stock traded to a high of $131.95 and a low of $118.31 before closing the day at $127.50, an increase of 6.41%.

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’s 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 out of their rout.

Peabody improves

Peabody Energy’s 3.25% convertible notes due 2028 continued their upward momentum on an outright basis their second day in the secondary space.

The notes traded as high as 111 during Monday’s session but came in as the session progressed and were changing hands at 109 in the late afternoon.

While the notes gained about 3 points outright, they were moving in line on a dollar-neutral basis on a delta of 79%, a source said.

Peabody’s stock traded to a high of $17.75 and a low of $16.02 before closing the day at $17.34, an increase of 8.31%.

The 3.25% notes saw a strong secondary market debut on Friday, closing the day at 106 and expanding 4 points dollar-neutral.

Mentioned in this article:

Peabody Energy Corp. NYSE: BTU

Square Inc. NYSE: SQ

Zscaler Inc. Nasdaq: ZS

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