Convertibles trade quietly, flat on hedge; Priceline unchanged; Photronics shares higher

By Rebecca Melvin

New York, Aug. 21 – U.S. convertibles traded quietly and in line, or flat, on a hedged basis on Thursday in tandem with their underlying shares as the dog-days of August progressed.

Priceline Group Inc. and Illumina Inc. were among the most actively traded issues again, as has been the case all week.

Priceline’s $1 billion of convertibles, which priced earlier this month, traded near the unchanged mark at around 98.5. Priceline shares were fractionally lower.

“They look pretty flat; they are still trading below the reoffer price,” a New York-based trader said of Priceline.

Elsewhere, shares of Photronics Inc. extended gains on a stock upgrade following better-than-expected quarterly results reported late Tuesday. Needham upgraded the shares to “buy” from “hold.”

Photronics’ older 5.5% convertibles, which mature later this year, were quoted up multiple points to 183.5 but weren’t seen to have traded Thursday amid a 5.5% climb in the underlying shares.

Photronics’ newer 3.25% convertibles due 2016 were also quiet Thursday and last seen in trade at about 106. Brookfield, Conn.-based Photronics is a maker of semiconductor manufacturing components.

Shares of Cubist Pharmaceuticals Inc. were higher in early trading, and those bonds were in focus. The Cubist 1.875% convertibles due 2020 changed hands at 110.965, which was up 0.5 point, according to Trace data. And the Cubist 2.5% convertibles due 2017 traded at 230.75.

Shares of the Lexington, Mass.-based biopharmaceutical company were up 94 cents, or 1.4%, at $65.73 at late morning but pared gains later in the session, ending up only 12 cents, or 0.2%, at $64.92.

“There was nothing out of the ordinary in trading. Everything was pretty quiet and seemed to trade in line,” a New York-based trader said.

“Nothing was gap-y in my space,” the trader said.

“It feels like the holiday already. I think people are getting ready for Labor Day early,” he added.

On Wednesday, U.S. convertibles saw better buying interest following recent price weakness, including last week when $2.23 billion in new paper hit the market. In contrast, there have been no new issues in the convertibles market this week. Also on Wednesday, equities rose following the release of the Federal Open Market Committee meeting minutes, which left many market pundits expecting a possible rate rise sooner than previously expected.

On Thursday, equities extended gains, leaving the S&P 500 stock index in record territory again at 1,992.37, after it tacked on 5.86 points. The Dow Jones industrial average rose 60.36 points, or 0.4%, to 17,039.49 but was still 0.6% below its record high set on July 16; and the Nasdaq stock index added 5.62 points, or 0.1%, to 4,532.10. Equity trading volume remained light, however.

For Friday, the speeches that Federal Reserve chairman Janet Yellen and European Central Bank president Mario Draghi deliver at Jackson Hole are expected to be in focus. Central bankers, economist and others have gathered for the Federal Reserve Bank of Kansas City’s conference on the economy and monetary policy in Jackson Hole, Wyoming.

Yellen’s speech is being watched for signs of when the Fed plans to start raising rates after it ends its bond-purchasing program this fall. The Fed Funds rate has not changed from near zero since the end of 2008.

Mentioned in this article:

Cubist Pharmaceuticals Inc. Nasdaq: CBST

Illumina Inc. Nasdaq: ILMN

Photronics Inc. Nasdaq: PLAB

Priceline Group Inc. Nasdaq: PCLN

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