Pre-holiday convertible volume thin; Southwest Airlines flat; American Airlines down

By Cristal Cody

Tupelo, Miss., Dec. 22 – Convertible bond trading levels slowed considerably on Friday with desks lightly staffed and most looking toward the long holiday weekend.

“Nothing is going on,” a trader said. “The volume is pathetic.”

Overall trading in the convertibles space saw its lowest supply of the week on Friday with around $287 million of volume by the early close.

Secondary volume in the convertible bond market totaled less than $44 million about an hour after the market opened.

Supply on Thursday totaled around $601 million, down from $821 million on Wednesday, more than $830 million on Tuesday and $701 million on Monday.

Stock indices were positive as the session got underway but finished mixed.

The S&P 500 index closed up 0.17%, the Dow Jones industrial average fell 0.05%, the Nasdaq improved 0.19% and the Russell 2000 index was 0.84% higher.

Southwest Airlines Co.’s 1.25% convertible notes due May 1, 2025 (Baa1/BBB) went out flat in one of the day’s most active issues on nearly $10 million of trading.

Over the morning, American Airlines Group Inc.’s 6.5% convertible notes due July 1, 2025 traded off more than 1.75 points but were not seen in active trading over the afternoon.

Palo Alto Networks Inc.’s 0.375% convertible notes due June 1, 2025 went out more than 2 points better after softening about 0.5 point early in the session.

Southwest Air flat

Southwest Airlines’ 1.25% convertible notes due May 1, 2025 (Baa1/BBB) traded flat on a 102 handle versus an equity price of $29.52 on Friday, a source said.

The issue saw over $9 million of volume by the early close.

Southwest Airlines’ common stock closed down 0.27% to $29.50 on less-than-average volume. Shares ranged from $29.36 to $29.86 over the session.

American Airlines lower

In early trading, American Airlines’ 6.5% convertible notes due July 1, 2025 declined more than 1.75 points to a 112 handle versus an equity price of $14.30, a source said.

The issue was among the most active convertible bonds moving over the morning on $2 million of volume but was not seen among the most active issues over the afternoon.

American Airlines’ shares finished down 0.28% to $14.31 on Friday in mostly light trading with the shares stuck in the $14.21 to $14.40 range over the session.

Palo Alto declines

Palo Alto Networks’ 0.375% convertible notes due June 1, 2025 went out more than 2.25 points higher on Friday on a 300 handle versus an equity price of $298.53, a source said.

Trading totaled $4.35 million with the issue reversing losses from earlier in the day.

The notes had declined about 0.5 point to around 297.50 versus an equity price of $298.76 on $4 million of trading about an hour into the session.

The activity follows news reports this week that company director John Key Sells sold shares of the cybersecurity provider on Dec. 18.

Palo Alto Networks’ common stock closed 0.4% lower at $298.21 in thin trading.

Shares have traded as low as $132.22 to as high as $318 over the past year.

Mentioned in this article:

Southwest Airlines Co. NYSE: LUV

American Airlines Group Inc. Nasdaq: AAL

Palo Alto Networks, Inc. Nasdaq: PANW

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