Convertibles trade quietly in line; Splunk issues little changed; Tesla 2022 bonds gain

By Rebecca Melvin

New York, Sept. 20 – U.S. convertibles traded quietly on Thursday with valuations basically unchanged on the days as stocks moved up and the Dow Jones industrial average and S&P 500 stock index closed at new all-time highs, according to market sources.

The solid footing of the U.S. economy has caused some investors to throw off trade concerns and focus on strong corporate profits this week.

But there wasn’t much to watch in the convertibles space on Thursday, two sources said.

Both of Splunk Inc.’s new issues traded slightly lower, in line with the underlying shares, which were under pressure for most of the session but recovered into the close, to end up 23 cents, or 0.2%, at $115.66.

The San Francisco-based software company priced $1.85 billion of convertibles in two tranches late Wednesday.

Splunk’s 0.5% convertibles due 2023 and 1.125% convertibles due 2025 both were at 99.375 bid, 99.75 offered versus a share price of $115.25, a New York-based trader said.

That was lower on an outright basis compared to their close at around par on Wednesday but unchanged on a dollar-neutral, or hedged, basis.

“Whatever cheapness those bonds had at issue was negated by the deal size. They are trading in line to issue, dollar neutral,” the trader said.

A second trader commented that the new Splunk issues “should have come on the cheaps.”

The five-year Splunk tranche priced at the midpoint of coupon talk.

There were trades higher on Tesla Inc.’s 2022 convertibles at 111 even though the underlying stock was down almost 1%.

The Tesla straight and convertible bonds have been improving dollar neutral despite an investigation by the Department of Justice on the tweets by chief executive officer Elon Musk on taking the company private, a trader commented.

In the broader markets, both stocks and bonds rose, while crude oil slipped and the U.S. dollar was essentially unchanged.

The Dow Jones industrial average jumped 251.22 points, or 1%, to 26,656.98. The S&P 500 stock index added 22.80 points, or 0.8%, to 2.930.75, and the Nasdaq stock index surged 78.19 points, or 1%, to 8.028.23.

Mentioned in this article:

Splunk Inc. Nasdaq: SPLK

Tesla Inc. Nasdaq: TSLA

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