Convertibles trading quiet as CPI tanks markets; SSR Mining sinks outright, up on hedge

By Abigail W. Adams

Portland, Me., Feb. 13 – The convertibles primary market was dormant on Tuesday and the secondary space heavy as the latest U.S. Consumer Price Index report tanked markets.

Equity indexes sank as Treasury yields jumped with the CPI report coming in hotter-than-expected, further dashing market expectations for imminent rate cuts.

The Dow Jones industrial average closed Tuesday down 525 points, or 1.35%, the S&P 500 index closed down 1.37%, the Nasdaq Composite index closed down 1.8% and the Russell 2000 index closed down 3.96%.

The convertibles secondary space was also taking a hit with on-the-run names off 0.25 to 0.5 point dollar-neutral, a source said.

Heavily leveraged names were driven down even further.

While the market was heavy, volume was light with $48 million in reported convertible bond trading volume about one hour into the session and $321 million on the tape in the late afternoon.

The high-grade names that typically drive volume in the space were quiet on Tuesday although the segment of the market was likely also lower amid the move in rates.

“There’s a little bit of deer in the headlights going on,” a source said.

While trading volume was light, there were large movements in some outstanding issues with topical and earnings-related news compounding the move in broader markets.

SSR Mining Inc.’s 2.5% convertible notes due 2039 sank outright but improved on hedge with stock more than sliced in half after a landslide shut down its Turkish mine.

Shopify Inc.’s 0.125% convertible notes due 2025 were also lower outright but flat to improved on hedge as stock sank post-earnings.

Datadog Inc.’s 0.125% convertible notes due 2025 were volatile after earnings with the notes rising and falling alongside stock as the market digested the company’s earnings.

SSR Mining expands

SSR Mining’s 2.5% convertible notes due 2039, an off-the-run issue that rarely trades in volume, was in focus on Tuesday as stock got sliced by more than half after a landslide shut down its Turkish mine.

The 2.5% convertible notes sank about 10 points outright with stock off about 60%.

The notes were changing hands at 87.125 versus a stock price of $3.82 in the late afternoon.

The notes expanded on the move down and were up about 1 point dollar-neutral.

“They held up better than I thought they would,” a source said.

The notes were trading on a 30 delta heading into Tuesday’s session but were on a 15 delta in the late afternoon.

There was $14 million in reported volume.

SSR Mining’s stock traded to a low of $3.76 and a high of $8.30 before closing at $4.50, a decrease of 53.70%.

Stock sank after the company announced operations at its Turkish mine had ceased after a landslide at the site with nine miners still missing.

It is unclear if the site will be able to resume operations, a source said.

Shopify’s earnings

Shopify’s 0.125% convertible notes due 2025 were lower outright but flat to slightly improved on hedge as stock sank double digits post earnings.

The 0.125% convertible notes were down 2 points outright with stock off more than 10%.

They were trading at 95.75 in the late afternoon.

The notes were unchanged to up about 0.25 point on hedge, a source said.

There was $8 million in reported volume.

Shopify’s stock traded to a low of $77.01 and a high of $83.49 before closing at $77.18, off 13.40%.

Stock sank after the e-commerce company’s earnings report.

Shopify reported earnings per share of 34 cents versus the 30 cents expected.

Revenue was $2.14 billion versus the $2.07 billion expected.

While Shopify reported an earnings beat, stock sold off on weak guidance.

Datadog volatile

Datadog’s 0.125% convertible notes due 2025 were volatile in active trade on Tuesday as stock wavered between gains and losses following earnings.

The 0.125% convertible notes traded down 6 points outright with stock off as much as 9% at the open.

However, they pared their losses as stock fought its way back to positive territory as the session progressed.

The 0.125% convertible notes were trading at 150.625 versus a stock price of $134.59 early in the session, according to a market source.

However, the notes again came in as stock fell alongside broader markets as the session progressed.

The notes were down about 5 points outright in the late afternoon.

They were trading at 147 versus a stock price of $129.66 heading into the market close.

There was $14 million in reported volume.

Datadog’s stock traded to a low of $123.50 and a high of $138.61 before closing at $131.68, down 2.35%.

Datadog reported earnings per share of 44 cents, which were largely in line with expectations.

Revenue was $589.65 million versus analyst expectations for revenue of $568.25 million.

However, the cybersecurity company provided guidance that was softer than expected, which triggered the early selling.

Mentioned in this article:

Datadog Inc. Nasdaq: DDOG

Shopify Inc. NYSE: SHOP

SSR Mining Inc. Nasdaq: SSRM

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.