Morning Commentary: Convertibles market tone improves; Restoration Hardware recoups a point

By Rebecca Melvin

New York, Feb. 26 – The convertibles market was “feeling better” early Friday with more evidence of market players willing to step in and buy some of the lower credit and beaten down names in the space, a New York-based trader said.

“Market tone feels better. There is a bit of a bid under some of the speculative credit stuff,” the trader said. Earlier in the week, the market was weaker, but in general that feeling that converts are teetering on the edge of a cliff has passed, the trader said.

Restoration Hardware Holdings Inc.’s two series of 0% convertibles were seeing a bit of a bid and were both better by about a point after sliding sharply on Thursday after the Corte Madera, Calif.-based specialty retailer pre-announced quarterly results that fell short of expectations.

Restoration Hardware’s older 0% convertibles due 2019 traded at 77.475, which was up about a point on the day, according to Trace data. Restoration Hardware’s newer 0% convertibles due 2020 traded at about 70, which was up from 68 on Thursday. Both bonds remain well below where they had been before the preannouncement, however.

Elsewhere Colony Financial Inc.’s 3.875% convertibles traded at 88 early Friday, which was up about 0.5 point from recent trades after the Santa Monica, Calif.-based real estate investment and finance company posted results that were better than expected.

The REIT space remains down, but there wasn’t a palpable return of interest in this space where some shares are on the rise.

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