Morning Commentary: Ares Capital convertibles in focus in early trading post-earnings

By Abigail W. Adams

Portland, Me., July 27 – It was a busy day for markets with earnings reports pouring in and the Federal Reserve set to announce a widely anticipated 75 basis point rate increase at the conclusion of its meeting this afternoon.

Equity indexes resumed their climb early in Wednesday’s session with earnings reports from tech behemoths coming in better than expected.

The Dow Jones industrial average was up 141 points, or 0.44%, the S&P 500 index was up 1.32%, the Nasdaq Composite index was up 2.43% and the Russell 2000 index was up 0.77% shortly before 11 a.m. ET.

While the market digested a slew of economic data and market players await Federal Reserve chair Jerome Powell’s afternoon press conference, few were making moves in the convertibles secondary space.

There was $80 million of convertibles trading on the tape about one hour into the session with one name accounting for nearly one-fourth of the total reported volume.

Ares Capital Corp.’s 4.625% convertible notes due 2024 (Baa3/BBB-) were in focus after the specialty finance company announced earnings.

The 4.625% notes were changing hands at 107.375 versus a stock price of $19.75 early in the session.

There was $15 million in reported volume with several large $5 million plus trades on the tape.

Ares’ stock traded at $19.52, a decrease of 0.13%, shortly before 11 a.m. ET.

Ares beat expectations on both the top and bottom lines with earnings of 46 cents per share versus analyst estimates for 44 cents and revenue of $479 million versus expectations for revenue of $466.21.

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