High-grade convertible bonds under pressure; Super Micro holds; Rexford below par

By Abigail W. Adams

Portland, Me., April 10 – While the convertibles primary market remained dormant on Wednesday with sources expecting another paperless week, the secondary space saw an uptick of activity as the latest Consumer Price Index report crashed expectations for a June rate cut.

The secondary space was heavy on Tuesday with heavy selling in equities and Treasuries as markets braced for a higher-for-longer rate environment after a hotter-than-expected CPI print.

The Dow Jones industrial average closed Wednesday down 422 points, or 1.09%, the S&P 500 index closed down 0.95%, the Nasdaq Composite index closed down 0.84% and the Russell 2000 index closed down 2.52%.

The two-year Treasury yield shot up 22 basis points to 4.98% and the 10-year yield 18 bps to 4.55%.

There was $130 million in reported volume about one hour into the session and $780 million on the tape heading into the market close.

High-grade names were weak amid the rate move with Rexford Industrial Realty, LP’s two tranches of exchangeable notes (Baa2/BBB+/BBB+) hitting their lowest level since pricing.

NextEra Energy, Inc.’s 3% convertible notes due 2027 (Baa1/BBB+) were also lower in heavy volume.

While the broader market was heavy, Super Micro Computer Inc.’s 0% convertible notes due 2029 were holding in active trade with topical news bolstering the notes and stock.

Rexford below par

Rexford Industrial Realty’s two tranches of exchangeable notes broke below par on Wednesday with high-grade names taking a hit across the board on the rate move.

Rexford’s 4.125% exchangeable notes due 2029 were down 1.25 points outright to trade at 100.25 early in the session, according to a market source.

They broke below par for the first time since pricing and were trading at 99.625 in the late afternoon.

There was $30 million in reported volume.

The 4.375% exchangeable notes due 2027 were down 1 point outright to trade at 100.375 early in the session, a source said.

They continued to move lower and were trading at 99.25 in the afternoon.

There was $11 million in reported volume.

Rexford’s stock traded to a low of $47.42 and a high of $48.20 before closing at $47.89, a decrease of 3%.

Wednesday marked the lowest level for Rexford’s exchangeable notes since the $500 million tranches priced at par on March 26.

The notes were one of the last deals to clear the convertible bond primary market.

NextEra lower

NextEra’s 3% convertible notes due 2027 continued to see heavy volume on Wednesday with the notes taking a hit alongside the broader market.

The notes were down 1.5 points outright with stock off more than 2% early in the session.

They were trading at 107 versus a stock price of $63.59, a source said.

The notes were trading at 106.875 in the late afternoon.

There was $45 million in reported volume.

NextEra’s stock traded to a low of $63 and a high of $64.24 before closing at $64.01, a decrease of 2.10%.

While volume in the secondary space has been light for the past several sessions, NextEra’s 3% notes have remained among the most actively traded issues.

Super Micro holds

Super Micro Computer’s 0% convertible notes due 2029 were among the most active issues of Wednesday’s session with the notes holding despite a heavy day for the market.

The 0% notes were largely unchanged and were changing hands at 104.625 early in the session, according to a market source.

They bumped up slightly to 104.75 in the late afternoon.

There was $30 million in reported volume.

Super Micro’s stock traded to a low of $871.10 and a high of $924 before closing at $908.54, an increase of 0.48%.

Stock alternated between gains and losses early in the session before closing largely unchanged.

News that the company had entered into a new collaboration to develop a smart city solutions platform helped bolster the stock as broader markets sold off.

Mentioned in this article:

NextEra Energy, Inc. NYSE: NEE

Rexford Industrial Realty Inc. NYSE: REXR

Super Micro Computer Inc. Nasdaq: SMCI

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