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Morning Commentary: Convertibles doused by downturn in equities; primary quiet; NXP eyed
By Rebecca Melvin
New York, Oct. 8 – Convertibles were mostly lower on an outright basis in light trade on Tuesday as equities remained under pressure amid worries about global economic slowing and trade tensions.
NXP Semiconductors NV’s 1% convertibles, which are going away on Dec. 1, were lower in tandem with a drop in the underlying shares. The bonds were seen down 3 points and change to 105.5, as shares of the Dutch chip maker slipped $3.33, or 3%, to $104.66.
This bond has been trading around in recent sessions as market players eye the upcoming maturity, sources have said.
The primary market was quiet late Monday and early Tuesday.
Among mandatories that were active in trade was Becton Dickinson and Co.’s $2.48 billion of 6.125% convertible preferreds due 2020. The paper was down 1.6% to $60.45, while Becton Dickinson common stock was down $4.87, of nearly 2%, at $245.09.
The major U.S. stock indices were all down by 1% or more at late morning. The U.S. Producer Price Index was the latest data to add to market pressures. The U.S. PPI dropped 0.3% in September, which was the largest decline since January and following a 0.1% gain in August. In the 12 months through September, the PPI increased 1.4%, the smallest gain since November 2016, after rising 1.8% in August.
Excluding food, energy and trade services, producer prices were unchanged last month after jumping 0.4% in August. The core PPI increased 1.7% in the 12 months through September after rising 1.9% in August.
Market observers see this data as giving the Federal Reserve more fuel for another rate cut when the FOMC meets at the end of this month.
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