Morning Commentary: MercadoLibre convertibles underperform; Ligand, PDC Energy in trade

By Rebecca Melvin

New York, Oct. 3 – MercadoLibre Inc. was pulled into trade in the convertibles market as the broader markets continued to struggle with slowing economic growth and recession fears.

The MercadoLibre 2% convertible notes due 2028 traded down to 144 in the early going on Thursday from around 146 on Wednesday. Shares of the Argentine e-commerce and online auctions site were down $2.54, or 0.5%, at $541.56. MercadoLibre shares are still higher for the year to date, but they have dropped over the past month.

Whether convertible players are lightening up on risk was not clear. Regarding MercadoLibre, one market source said that the activity is likely indicative of weakness in emerging markets and selling in higher beta high yield and emerging markets. The name “would underperform the generic convert market due to that,” the source said.

Also seen in trade on Thursday was Ligand Pharmaceuticals Inc.’s 0.75% convertible notes due 2023, which changed hands in the early going at steady pricing compared to Wednesday as shares of the San Diego-based biopharmaceutical company traded higher.

The Ligand convertibles traded at 83.795 and 84.16, according to Trace data, with the underlying stock seen around $99.00.

PDC Energy Inc.’s 1.125% convertibles due 2021 traded at 94.125, which was up from 92 and change. Shares of the Denver-based oil and gas exploration and production company extended losses and were last seen at $25.72.

U.S. stocks started the session lower and bonds were up as this week’s economic data continued to show a less robust economy than hoped. Services put in a less strong showing in the Institute for Supply Management’s U.S. nonmanufacturing index, which was 52.6 in September, and still showing expansion but at its lowest reading since August 2016. The figure was down from 56.4 in the prior month.

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