Morning Commentary: Royal Caribbean convertible notes come in; primary market quiet

By Abigail W. Adams

Portland, Me., Aug. 22 – It was an uneventful morning in the convertibles secondary space on Monday with the summer doldrums in full effect.

Activity in both the primary and secondary markets is expected to be light for the duration of the week, a source said.

Selling pressure resumed in equity markets with indexes again deep in the red as the market reassessed its expectations for the Federal Reserve’s rate hike schedule.

However, it did little to spark activity in the secondary space.

The Dow Jones industrial average was down 512 points, or 1.52%, the S&P 500 index was down 1.87%, the Nasdaq Composite index was down 2.26% and the Russell 2000 index was down 1.87% shortly before 11 a.m. ET.

There was $26 million in reported volume about one hour into the session with no name seeing concentrated trading activity.

Royal Caribbean Group’s 6% convertible notes due 2025 were among the most active issues early in the session with the notes giving back some of the large gains made since pricing in early August.

The 6% notes fell 2.5 points outright with stock off more than 4%.

The notes were changing hands at 107.375 versus a stock price of $37.85 in early trade.

There was $3 million on the tape.

Royal Caribbean’s stock was seen at $38.06, a decrease of 4.14%, shortly before 11 a.m. ET.

The notes have been under pressure over the past few sessions as selling pressure returned to equities after a three-week rally.

The notes traded as high as 116 on an outright basis last Monday but have trended downward since.

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