Semiconductor names eyed in convertibles market amid earnings; Insmed notes expand

By Abigail W. Adams

Portland, Me., Jan. 28 – The convertible secondary space was quiet on Tuesday with the heavy trading volume seen in previous weeks tapering off.

There was $51 million in reported volume about one hour into Tuesday’s session and $317 million in reported volume by the late afternoon, sources said.

Few names saw concentrated trading activity.

With the convertibles primary market quiet and markets rebounding from the coronavirus jitters, eyes were on the slew of earnings reports expected before the week draws to a close.

Several semiconductor names were active in the space as industry peers prepared to report earnings.

Microchip Technology Inc.’s 1.625% convertible notes due 2027 and ON Semiconductor Corp.’s 1.625% convertible notes due 2023 were active with the notes making gains alongside stock.

While neither company is slated to report earnings until next week, Advanced Micro Devices Inc. will report earnings after the market close on Tuesday – an indication of where the sector stands.

Zynga Inc.’s 0.25% convertible notes due 2024 were also among the volume movers of Tuesday’s session as stock broke above its 200-day moving average.

Tuesday was also a strong day for the biotech sector with Insmed Inc.’s 1.75% convertible notes due 2025 making gains on both an outright and dollar-neutral basis.

Semiconductor’s eyed

The semiconductor sector was in focus on Tuesday as earnings reports from sector peers begin to pour in.

Microchip’s 1.625% convertible notes due 2027 were active although the notes were largely trading in line with stock, sources said.

The 1.625% notes were changing hands at 141.5 early in the session with stock up almost 2%.

They were trading just north of 141 versus a stock price of $104.13 in the late afternoon. The bonds saw more than $10 million in reported volume.

The Chandler, Ariz.-based developer and manufacturer of semiconductor equipment’s stock traded to a high of $105.16 and a low of $104.15 before closing the day at $104.20, an increase of 1.18%.

ON Semiconductor’s 1.625% convertible notes due 2023 were also in focus on Tuesday. The 1.625% notes were changing hands at 136.75 versus a stock price of $24.10 in the late afternoon.

The bonds saw more than $12 million in reported volume during Tuesday’s session.

The Phoenix-based semiconductor supplier’s stock traded to a high of $24.31 and a low of $23.71 before closing the day at $24.17, an increase of 2.16%.

While Microchip and ON Semiconductor are not slated to release earnings until next week, AMD will report earnings after the market close on Tuesday.

AMD’s highly anticipated earnings report will be an indication of where the semiconductor space stands in its cycle and whether the 4% to 5.9% revenue growth that has been projected for semiconductors in 2020 will come to bear.

AMD’s deep-in-the-money 2.125% convertible notes due 2026 were one of the outperformers in the convertible space in 2019 and responsible for a large portion of the more than 20% returns seen in the Bloomberg Barclays US Convertible index.

The notes currently trade above six times par and are largely an equity surrogate, sources said.

Zynga’s bulls

Zynga’s 0.25% convertible notes due 2024 were among the major volume movers during Tuesday’s session as the social game developer’s stock showed signs of bullish momentum.

The 0.25% convertible notes were up about 1.5 points outright to 103.625 in the late afternoon.

With more than $12 million in reported volume, the 0.25% convertible notes were among the most active in the secondary space.

Zynga stock traded to a high of $6.19 and a low of $5.94 before closing the day at $6.07, an increase of 2.36%.

Stock broke above its 200-day moving average on Tuesday, a bullish signal as the company prepares to report earnings next week.

Zynga is slated to report fourth-quarter earnings on Feb. 5.

Insmed expands

Insmed’s 1.75% convertible notes due 2025 were making gains on both an outright and dollar-neutral basis as the biotech company’s stock popped on a strong day for the sector.

The 1.75% convertible notes rose about 1.25 points outright. They were changing hands at 93.5 versus a stock price of $20.76 in the late afternoon.

The notes were expanded about 1 point dollar-neutral, a market source said. There was some cross-over buying of the convertible notes, the source said.

Insmed stock traded to a high of $20.91 and a low of $19.99 before closing the day at $20.71, an increase of 4.91%.

While the biotech company that is focused on rare diseases is not slated to report earnings until the end of February, analysts are expecting solid year-over-year revenue growth.

Mentioned in this article:

Advanced Micro Devices Inc. Nasdaq: AMD

Insmed Inc. Nasdaq: INSM

Microchip Technology Inc. Nasdaq: MCHP

ON Semiconductor Corp. Nasdaq: ON

Zynga Inc. Nasdaq: ZNGA

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