Morning Commentary: Convertibles trading slows; Palo Alto, American Airlines lower

By Cristal Cody

Tupelo, Miss., Dec. 22 – Convertible bond trading levels slowed considerably on Friday with desks lightly staffed and most looking toward the long holiday weekend.

“Nothing is going on,” a trader said. “The volume is pathetic.”

Secondary volume in the convertible bond market totaled less than $44 million about an hour after the market opened.

The supply was the lowest seen over the week.

On Monday morning, secondary volume totaled over $74 million, while trading activity came to more than $111 million early Tuesday, more than $76 million in the same period on Wednesday and $83 million on Thursday morning.

Stock indices remained positive as the session got underway.

The S&P 500 index rose 0.23%, the Dow Jones industrial average edged up 0.04%, the Nasdaq improved 0.22% and the Russell 2000 index added 0.96%.

Palo Alto Networks Inc.’s 0.375% convertible notes due June 1, 2025 traded down about 0.5 point in the busiest issue seen moving on $4 million of volume.

American Airlines Group Inc.’s 6.5% convertible notes due July 1, 2025 traded off more than 1.75 points in one of the most active convertible bonds over the morning on $2 million of volume.

Palo Alto declines

Palo Alto Networks’ 0.375% convertible notes due June 1, 2025 fell about 0.5 point to around 297.50 early Friday versus an equity price of $298.76, a source said.

The bonds saw $4 million of trading about an hour into the session.

The activity follows news reports this week that company director John Key Sells sold shares of the cybersecurity provider on Dec. 18.

Palo Alto Networks’ common stock slipped 0.07% to $299.20 in thin trading Friday morning.

Shares have traded as low as $132.22 to as high as $318 over the past year.

American Airlines lower

American Airlines’ 6.5% convertible notes due July 1, 2025 traded off more than 1.75 points to a 112 handle early Friday versus an equity price of $14.30, a source said.

The issue was among the most active convertible bonds moving over the morning on $2 million of volume.

American Airlines’ shares were off 0.45% in light early trading at $14.28 on Friday.

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