Morning Commentary: Intel active; SunEdison, Healthways weak as broader markets tumble

By Rebecca Melvin

New York, Oct. 15 – U.S. convertibles were weak but relatively inactive early Wednesday as weak data hit the broader financial markets.

There was little more than $150 million of convertible bonds that changed hands by late morning and more than $28 million of that was in Intel Corp., a New York-based trader said, referring to Trace data trading tallies.

“There’s not a lot going on,” he said, other than a continuation of the drop in smaller-coupon convertibles of longer duration.

The small coupon, 2018, 2019 bonds are getting slaughtered,” he said. But that has been going on for six weeks or more, he noted.

Names like SunEdison Inc. and Healthways Inc. were examples of the types of names that have recently come in sharply. Healthways has a 1.5% convertible senior note due 2018 that priced in July 2013.

“These things have zero protection to the downside,” he said. They have durations that are too long, and pricing that was not generous enough.

Meanwhile, some bottom fishers stepped in early Wednesday, with bids seen in a couple of energy names that have been hit hard in recent sessions.

There was a bid in Alpha Natural Resources Inc.’s 3.75% convertibles at 53. Those bonds traded on Tuesday at 53.5 bid, 54 offered.

“That’s a stand up bid in this market,” a trader said.

Energy XXI (Bermuda) Ltd. was bid at 64. That convertible was down on Tuesday and tumbled much of last week.

Affecting the broader markets were economic reports, including the Commerce Department’s U.S. retail sales figures that showed a 0.3% decline in September that was bigger than forecast.

The Empire State Manufacturing Survey for October showed manufacturing in the Federal Reserve Bank of New York’s region dropped to 6.2 this month from 27.5 in September. That slowing was greater than expected.

Another report showed wholesale prices fell in September.

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