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Morning Commentary: High-grade convertible notes active with the Fed in focus
By Abigail W. Adams
Portland, Me., Dec. 12 – The convertibles primary market remained dormant on Tuesday with many questioning the pipeline as the market enters the final weeks of the year.
However, the secondary space was active with high-grade convertible notes driving volume as markets digest the latest Consumer Price Index report and await the Federal Open Market Committee’s Wednesday announcement.
Equity and Treasury markets saw a muted response to the latest CPI print, which came in largely as expected but still reflected an uptick in inflation.
Equity indexes were either side of unchanged early in the session with the Dow Jones industrial average up 72 points, or 0.20%, the S&P 500 index up 0.04%, the Nasdaq Composite index up 0.12% and the Russell 2000 index down 0.39% shortly before 11 a.m. ET.
Treasuries were largely flat.
There was $158 million in reported convertibles trading volume about one hour into the session with the top five traders, which accounted for one-third of the activity in the space, investment grade.
Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) were slightly weaker on a soft day for the company’s stock.
The 3.875% convertible notes were off about 0.25 point outright with stock down 1%.
The notes were trading at 99.875 versus a stock price of $71.34 early in the session, according to a market source.
There was $18.5 million in reported volume.
Southern Co.’s stock was trading at $70.53, a decrease of 1.2%, shortly before 11 a.m. ET.
CenterPoint Energy Inc.’s 4.25% convertible notes due 2026 (Baa2) were also active.
The notes were trading just shy of par versus a stock price of $28.93 early in the session.
There was $13 million in reported volume.
CenterPoint’s stock was trading at $28.91, a decrease of 0.48%, shortly before 11 a.m. ET.
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