Morning Commentary: Convertible primary, secondary quiet; Intercept active as shares drop again

By Rebecca Melvin

New York, Oct. 6 – The convertible bond market was mostly quiet early Friday as a lack of new issuance and record high stock prices keep a lid on opportunities in the space, a New York-based trader said.

Although stocks dipped Friday after monthly jobs data revealed the U.S. economy lost jobs in September for the first time since 2010, the securities that underlie convertibles have notched a string of record highs in recent months that push indices to seemingly endless gains.

One name moving lower on the day, however, was Intercept Pharmaceuticals Inc. The Intercept 3.25% convertibles due 2023 were seen trading on Friday at 81.25 versus an underlying share price of $69.00, the trader said.

Intercept shares were down $6.00.

Intercept has had a rocky ride since the U.S. Food and Drug Administration warned doctors last month to monitor patients taking Intercept’s liver disease drug Ocaliva because incorrect dosing could result in increased risk of serious liver injury and death.

Meanwhile, the convertible primary market was silent this past week with no new issues launched or priced. And data was a focus of early attention on Friday.

U.S. non-farm payrolls for September lost 33,000 jobs, taking a hit for the first time in seven years, and the unemployment rate dropped to 4.2% from 4.4%, well below the 4.6% rate that the Federal Reserve deems normal for the long term. The Labor Department had warned before it released the data that economic activity was likely to be affected by Hurricanes Harvey and Irma that hit the U.S. last month.

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