Morning Commentary: ZTO Express convertible notes in focus early, gain outright

By Abigail W. Adams

Portland, Me., Aug. 26 – Trading activity was muted in the convertibles secondary space as the markets digested the latest comments from Federal Reserve chair Jerome Powell.

Equity indexes were slightly negative leading into Powell’s speech and pared some losses while he spoke.

“Then reality set in,” a source said. “They’re going to keep raising rate.”

The Dow Jones industrial average was down 403 points, or 1.24%, the S&P 500 index was down 1.5%, the Nasdaq Composite index was down 1.95% and the Russell 2000 index was down 1.86% at 11 a.m. ET.

There was $72 million in reported volume about one hour into the session with ZTO Express’ 1.5% convertible notes due 2027 accounting for nearly half of the volume on the tape.

The 1.5% convertible notes continued to gain outright with the company’s equity remaining in the green despite the selling pressure in the market.

The 1.5% convertible notes were up 1.5 points outright with stock up more than 1% before selling accelerated.

The notes were changing hands at 103.25 versus a stock price of $25.66 early in the session, according to a market source.

There was $30.5 million in reported volume.

While equities were red, it was another strong day for the ADR space with the United States and China reaching an agreement over the auditing of Chinese firms and preventing their delisting.

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