Morning Commentary: Duke Energy convertible notes in focus; Exact Sciences active

By Abigail W. Adams

Portland, Me., Oct. 4 – It was another slow start to the day in the convertibles secondary space with the market remaining weak on a volatile day for equities.

Equity indexes launched the day strong on the heels of the latest ADP Employment Report, which painted a different picture of the labor market than Tuesday’s JOLTS report, which rattled markets.

While selling in Treasuries subsided after payroll growth slowed more sharply than expected, equity indexes gave up early gains and turned mixed shortly after the opening bell.

The Dow Jones industrial average was down 87 points, or 0.44%, the S&P 500 index was down 0.07%, the Nasdaq Composite index was up 0.40% and the Russell 2000 index was down 0.82% shortly before 11 a.m. ET.

There was $80 million in reported convertibles trading volume about one hour into the session with a wide range of names in play.

Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) continued to see heavy volume with the notes continuing to hold.

The notes were changing hands at 96.75 versus a stock price of $86.09 early in the session.

The yield was about 5.5%.

There was $10 million in reported volume.

Duke Energy’s stock traded down to $85.12, a decrease of 0.82%, shortly before 11 a.m. ET.

Duke Energy’s convertible notes have held up well amid the pressure in markets with the notes offering a safe haven, a source said.

While rates have jumped dramatically in the past two weeks, investment-grade spreads have held up well with spreads widening only 7 basis points compared to high-grade spreads widening 45 bps, a source said.

“Safety, safety, safety,” a source said.

While the broader market remained heavy, topical news sparked improvement in Exact Sciences Corp.’s convertible notes.

Exact Sciences’ convertible notes due 2030 were unchanged outright as stock dipped early in the session.

The 2% notes were seen at 107.25 versus a stock price of $65.19, according to a market source.

There was $4 million in reported volume.

Exact Sciences’ stock traded down to $65.01, a decrease of 0.90%, shortly before 11 a.m. ET.

The company’s stock has been under pressure since its second-quarter earnings report on Aug. 1.

However, it is preparing for a major expansion in the Pheonix area with the Phoenix City Counsil set to vote on a development agreement with the company on Wednesday.

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