Investment-grade convertible notes in focus; Alliant tops par; Insulet paper gains

By Abigail W. Adams

Portland, Me., March 13 – SVB Financial Group’s spectacular implosion continued to reverberate through global financial markets with the emergency measures undertaken by banking regulators to guarantee all deposits at the bank dramatically altering the rate hike narrative.

Treasuries continued to rally with the two-year yield falling 62 basis points to close Monday at 3.976% and the 10-year note yield falling 15 bps to close at 3.553% in early trade.

Market players were debating how high the Federal Reserve would hike rates on Wednesday, March 8. They are now debating whether the Federal Reserve will increase rates next week with the possibility of a rate reduction before the end of 2023 again on the table.

Equities remained volatile and credit spreads continued to widen on Monday as markets assessed the dramatic shift in macro landscape.

Equity indexes fought off deep losses at the open to close the day mixed with the tech heavy Nasdaq leading gains although the index closed well off its high of the day.

The Dow Jones industrial average closed Monday down 91 points, or 0.28%, the S&P 500 index closed down 0.15%, the Nasdaq Composite index closed up 0.45% and the Russell 2000 index closed down 1.60%.

The convertibles secondary space was soft but stable on Monday.

While convertible investors were “cautious,” there were no desperation sales hitting the market.

However, there was some selling in highly liquid names to raise cash with liquidity fears growing in the market, the source said.

Recently priced investment-grade convertible notes continued to dominate the tape with the top three issues accounting for nearly one-fifth of the total $576 million in reported volume in the late afternoon.

Alliant Energy Corp.’s 3.875% convertible notes due 2026 (BBB+) made large outright gains with the notes topping par for the first time since pricing at par on Feb. 27.

Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) and PPL Capital Funding Inc.’s 2.875% convertible notes due 2028 (Baa1/BBB+) also improved.

Insulet Corp.’s 0.375% convertible notes due 2026 jumped outright and made nominal gains dollar-neutral following news the medical equipment company would replace SVB in the S&P 500 index.

IG focus

Investment-grade convertible notes dominated the tape on Monday with some selling highly liquid names to raise cash and some opportunistic buyers moving in as credit spreads widened.

Alliant’s 3.875% convertible notes due 2026 jumped above par for the first time since pricing.

The 3.875% convertible notes gained 1.625 points outright with stock up 2.5%.

The notes were changing hands at 100.75 versus a stock price of $51.92 in the late afternoon, according to a market source.

There was $53 million in reported volume.

Alliant’s stock traded to a low of $49.78 and a high of $52.60 before closing at $51.48, an increase of 2.57%.

Southern Co.’s 3.875% convertible notes due 2025 gained about 0.5 point outright.

They were largely flat at 98.625 versus a stock price of $63.94 early in the session.

However, they improved as the session progressed and were changing hands at 99.125 versus a stock price of $65.60 in the late afternoon.

There was $48 million in reported volume.

Southern Co.’s stock traded to a low of $63.79 and a high of $66.78 before closing at $65.15, an increase of 1.89%.

PPL’s 2.875% convertible notes due gained 1 point outright with stock up 2%.

The notes were seen at 97.75 versus a stock price of $27.19 in the late afternoon.

There was $23 million in reported volume.

PPL’s stock traded to a low of $25.97 and a high of $27.41 before closing at $26.76, up 1.94%.

Insulet gains

Insulet’s 0.375% convertible notes due 2026 jumped outright and improved dollar-neutral as stock soared following news it would replace SVB in the S&P 500 index.

The 0.375% notes added 9 points outright with stock up more than 8%.

The notes were trading at 143.5 versus a stock price of $304.79 in the late afternoon.

The notes gained about 0.25 point on the move up, a source said.

There was $17 million in reported volume.

Insulet’s stock traded to a low of $292.30 and a high of $308.40 before closing at $303.44, an increase of 8.23%.

Insulet will be added to the S&P 500 on Wednesday.

Mentioned in this article:

Alliant Energy Corp. Nasdaq: LNT

Insulet Corp. Nasdaq: PODD

PPL Capital Funding Inc. NYSE: PPL

Southern Co. NYSE: SO

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