Morning Commentary: Snap convertible notes in focus, fall outright in early trading

By Abigail W. Adams

Portland, Me., Feb. 7 – The convertibles primary market remained dormant early Wednesday with the window of opportunity for new issuance diminishing.

The secondary space also saw a quiet start to the day with equity indexes mixed and Treasuries largely flat as markets continue to reassess the rate environment.

The Dow Jones industrial average was up 197 points, or 0.51%, the S&P 500 index was up 0.79%, the Nasdaq Composite index was up 0.94% and the Russell 2000 index was down 0.26% shortly before 11 a.m. ET.

There was $52 million in reported convertible bond trading volume about one hour into the session with few names seeing concentrated trading activity.

However, Snap Inc.’s convertible notes were active with the notes tumbling outright as stock plunged after an earnings disappointment.

Snap’s balanced 0.75% convertible notes due 2026 dropped 12 points outright with stock off about 30%.

The notes were changing hands at 96.25 versus a stock price of $11.93 early in the session, according to a market source.

There was $4 million in reported volume.

The 0.25% convertible notes due 2025 fell 9 points outright.

Those notes were changing hands at 97.75 versus a stock price of $12.13 early in the session.

There was $2 million in reported volume.

Snap’s less equity sensitive 0.125% convertible notes due 2028 and 0% convertible notes due 2027 were lower yet holding near their bond floor in light volume, according to a market source.

The 0.125% convertible notes due 2028 were down 2.5 points outright.

They were trading at 76.875 versus a stock price of $12 early in the session.

The yield rose to 6.7%.

There was $3 million in reported volume.

The 0% convertible notes due 2027 were off about 1 point to trade at 79.75 with the yield about 7.125%.

There was $2 million in reported volume.

Snap’s stock plunged to $11.57, a decrease of 33.7%, shortly before 11 a.m. ET.

Snap reported mixed earnings with earnings per share of 8 cents versus the 6 cents expected but revenue of $1.36 billion versus the $1.38 billion expected.

The camera and social media company also issued weak guidance.

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