Morning Commentary: Southwest Airlines moves in convertibles secondary; primary inactive

Chicago, Oct. 4 – Monday morning opened with a silent convertibles primary market and an empty calendar.

The 10-year Treasury, a concern of the previous week, continued to push up to 1.479% at last check.

The Dow Jones industrial average was down 1% with the Nasdaq Composite lower by 2.28% at midmorning.

Southwest Airlines Co.’s stock was in focus on Monday morning after a Barclays analyst predicted a rosier future for the airline.

The stock closed Friday at $54.35, and was coming in late Monday morning to trade at around $55.15 per share after hitting a high of $56.33 midmorning, a level the stock has not seen since late June.

The good news was enough to send the company’s 1.25% convertibles due May 1, 2025 into motion.

A few trades were on the tape in a range of around 157 to 158, a few points higher than Friday’s trades.

Friday was a rather busy day for Southwest’s bonds with trades starting around 155, shifting lower in the afternoon to trade around 152 and then steadily moving higher to close the day between 153 and 155.

Novavax Inc.’s stock continued to sink on Monday, off another 4.3%, trading at $173.79 after a Friday close at $181.60.

The stock is trading in the middle of its 52-week range of $76.59 to $331.68.

The decline has not spurred Novavax’s 3.75% convertibles due Feb. 1, 2023 into frenzied activity; however, there was a small trade on the board on Monday morning just above 152.

In the past two weeks, the bonds have moved as high as 199 with the bulk of the big trades in September around 185.

The 152 mark on Monday would be the lowest trade for the bonds since they shifted dramatically up in early June.

In May they were actively trading in the 130s and 140s before moving into the 170s and above rather consistently until Monday morning.

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