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Morning Commentary: Western Digital convertibles active as rates rise; Northern Oil up
By Abigail W. Adams
Portland, Me., Oct. 13 – The secondary space was relatively quiet early Thursday as equity and bond markets crumbled after the latest inflation reading.
Indexes opened deep in the red as the latest Consumer Price Index report solidified the market’s expectation for an additional 75 basis point rate increase in November.
While indexes fought back from their lows at the open, they remained in negative territory shortly before 11 a.m. ET.
The Dow Jones industrial average was down 85 points, or 0.30%, the S&P 500 index was down 0.85%, the Nasdaq Composite index was down 1.58% and the Russell 2000 index was down 0.88% shortly before 11 a.m. ET.
There was $53 million on the tape about one hour into the session.
However, two names accounted for nearly 50% of the reported convertibles trading volume.
Western Digital Corp.’s 1.5% convertible notes due Feb. 1, 2024 (Baa3) saw heavy volume but little movement in price as Treasury yields soared on the heels of the CPI report.
The 1.5% notes were changing hands just shy of 95 with a yield of 5.625% early in the session.
There was $15 million in reported volume but only four trades on the tape, a source said.
The notes have long traded for their yield, which looked less attractive on Thursday as the yield on the two-year Treasury note was trading above 4.5% early in the session.
Northern Oil and Gas Inc.’s 3.625% convertible notes due 2029 continued to add to their outright and dollar-neutral gains despite the rough tape.
The notes were up about 0.5 point outright with stock lower early in the session.
The notes were seen at 104.875 versus a stock price of $31.06 early in the session.
There was $5 million in reported volume.
Northern Oil’s stock traded down to $30.41 early in the session but was changing hands at $32.10, an increase of 2.85%, shortly before 11 a.m. ET.
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