Morning Commentary: Convertibles subdued as market eyes new presidency; New York Mortgage prices

By Stephanie N. Rotondo

Seattle, Jan. 18 – Trading was off to a sleepy start in the convertible bond market early Wednesday, even as a new issue priced.

One trader remarked that there was “slow turnover” in the space, as market players were waiting to see what the incoming Trump Administration would do once in office.

“The market has no certainty,” he said of the president-elect and his policies. Because of that, “the Dow has been treading water” under the 20,000-mark.

“We have been sitting at these prices for a long time now,” he added.

The market did not appear to be all that impressed with New York Mortgage Trust Inc.’s new $120 million of 6.25% convertible senior notes due 2022, a deal that priced ahead of the open at 96% of par, with an initial conversion premium of 10%.

A trader said the deal had only traded a handful of times, ranging between 95.875 and 96.375.

As for the underlying equity (Nasdaq: NYMT), it was unchanged at $6.37.

The offering came upsized from $100 million. Pricing was in the mid-range of the 6% to 6.5% coupon talk and at the cheap end of the 10% to 15% conversion premium.

Nomura Securities International Inc. ran the books.

The conversion rate is 142.7144 shares per each $1,000 of notes, equal to $7.01 per share. The rate is subject to adjustment in the event of a fundamental change.

Proceeds will be used to acquire targeted assets and for general working capital purposes, which may include the repayment of debt.

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