Morning Commentary: Illumina convertible notes tick higher as secondary activity slows

By Abigail W. Adams

Portland, Me., Dec. 23 – While equity markets remained volatile following the release of the Consumer Price Expenditure report, activity in the convertibles secondary space slowed to a crawl with not much expected from Friday’s session.

Indexes saw heavy selling after the opening bell but eliminated their losses and entered into positive territory about an hour into trading.

However, selling resumed with indexes mixed shortly before 11 a.m. ET.

The Dow Jones industrial average was up 35 points, or 0.11%, the S&P 500 index was up 0.12%, the Nasdaq Composite index was down 0.21% and the Russell 2000 index was up 0.22%.

While the November CPE report was looked to as the last major catalyst of market movement in 2022, the report was largely in line with expectations and the market reaction was muted.

Illumina Inc.’s soon-to-mature 0% convertible notes due Aug. 18, 2023 (BBB) remained the top traded issue in the space with the notes switching hands as their maturity approaches.

The 0% notes ticked higher to 97 in early trade with the yield decreasing to 4 7/8%, according to a market source.

There were two $5 million plus trades on the tape.

The notes also saw heavy volume on Thursday with the notes wrapped around 96.75 and the yield about 5¼%.

The notes have long traded for the yield with the notes expected to be redeemed at par upon their maturity.

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