Morning Commentary: Convertibles secondary gains; Halozyme active; Spirit Air rebounds

By Abigail W. Adams

Portland, Me., Nov. 15 – The convertibles secondary space remained active early Wednesday as buyers continued to return to the market on the heels of macro data pointing to an end to rate hikes.

Equity indexes extended their gains despite a pullback in Treasuries.

The Dow Jones industrial average was up 162 points, or 0.47%, the S&P 500 index was up 0.55%, the Nasdaq Composite index was up 0.63% and the Russell 2000 index was up 1.59% shortly before 11 a.m. ET.

The Producer Price Index report released pre-open continued to reflect easing inflation, adding fuel to the post-CPI rally of the previous session.

However, retail sales also slowed, calling into question the strength of the consumer-powered economy.

While there is disparity in the amount expected, analysts are now widely calling for rate cuts in 2024.

However, the rate cuts may not be the good news the market expects and the product of a serious economic downturn, sources warned.

While market players were beginning to turn an eye to 2024, the exuberance of cooling inflation continued to lift the convertibles secondary space.

There was $120 million in reported convertible bond trading volume about one hour into the session with names across the board continuing to improve.

Halozyme Therapeutics Inc.’s 1% convertible notes due 2028 made large gains in active trade as stock continued to ride an uptrend sparked by positive earnings.

The 1% notes added 2 points outright.

They were changing hands at 95.375 versus a stock price of $39.75 early in the session, according to a market source.

There was $8 million in reported volume.

Halozyme’s stock was trading at $40.55, an increase of 0.84%, shortly before 11 a.m. ET.

Halozyme’s stock has gained more than 8% over the past two sessions with the improved market conditions accelerating an uptrend sparked by positive earnings the previous week.

Spirit Airlines Inc.’s 1% convertible notes due 2026 also continued to rebound amid improved market conditions.

The 1% notes jumped 3 points outright.

The notes were trading at 51.5 with a yield of about 30% early in the session.

There was $7 million in reported volume.

While not equity sensitive, Spirit Airlines’ stock was strong on Wednesday and traded up to $11.02, an increase of 10.75%, shortly before 11 a.m. ET.

The 1% notes have made large gains over the past three sessions after closing out last week at an all-time low of 43.625.

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