Federal Reserve eyed; Twitter active on stock breakout; DISH convertibles down again

By Abigail W. Adams

Portland, Me., July 31 – While quiet early in the session, the convertibles secondary space was active heading into the afternoon.

The Federal Reserve announced its much anticipated decision regarding interest rate cuts.

Despite the widely anticipated decision to cut rates by 25 basis points, equity markets dropped following the announcement with the status of future rate cuts unclear.

The overall convertible space was still looking better to buy. However, the increase in volatility in the wake of the decision will make things interesting, a market source said.

Twitter Inc.’s convertible notes were again among the major volume movers in the secondary space with the notes unchanged to slightly contracted with stock breaking out to a new 52-week high.

DISH Network Corp.’s convertible notes continued their downward spiral on an outright and dollar-neutral basis following disappointing earnings and a threatened credit downgrade.

FireEye Inc.’s 0.875% convertible notes due 2024 were down outright but improved dollar-neutral as stock sank following mixed earnings and weak forward guidance.

Twitter active

Twitter’s convertible notes were again major volume movers in the secondary space with the notes unchanged to contracted slightly on a dollar-neutral basis as stock broke out to a new 52-week high.

The 0.25% convertible notes due 2024 were up 2 points outright to 107.75 in the late afternoon. However, they contracted about 0.25 point dollar-neutral on the move up, a market source said.

The 0.25% notes were changing hands around 106.25 early in Wednesday’s session.

There was about $8 million in reported volume a little over one hour into Wednesday’s session and $11 million heading into the market close.

Twitter’s 1% convertible notes due 2021 traded up about 1 point to 98.625 by the late afternoon. They were largely unchanged dollar-neutral.

Twitter stock broke out to a new 52-week high in intraday trading on Wednesday after several analysts raised their price target in the wake of better-than-expected earnings.

Twitter stock traded as high as $43.24 before coming in alongside the broader market to close the day at $42.31, a decrease of 3.2%.

Stock has been on the rise since the social media platform reported second-quarter earnings late last week.

DISH ‘pummeled’

DISH’s 3.375% convertible notes due 2026 continued “to get pummeled” on Wednesday after releasing a disappointing second-quarter earnings report earlier in the week, a market source said.

The notes continued their downward momentum on both an outright and dollar-neutral basis.

The notes were down another 1 point outright to change hands around 92.625 after a 4-point drop on Tuesday.

They were contracted between 0.25 point and 0.375 point dollar-neutral, a market source said.

There was about $5 million on the tape early in the session and $12 million in reported volume by the late afternoon.

There was a better seller in the market with the trading activity mostly follow-through from Tuesday’s session, a source said.

DISH stock traded down to close Wednesday at $33.86, a decrease of 3.12%. Stock was down more than 8% on Tuesday.

In addition to a second-quarter earnings miss, Moody’s Investors Service placed DISH on a credit downgrade watch due to the $5 billion divestiture deal between DISH and T-Mobile/Sprint.

The company has limited financial capacity for higher debt and leverage under its current Ba3 corporate family rating, Moody’s said in a press release.

FireEye’s earnings

FireEye’s 0.875% convertible notes due 2024 were down outright but improved dollar-neutral as stock sank after a mixed second-quarter earnings report.

The 0.875% convertible notes dropped about 2 points outright to change hands just north of 98.

The notes were improving on a dollar-neutral basis, according to a market source.

FireEye stock traded as low as $13.945 but pared their losses to close Thursday at $15.00, a decrease of 6.83%.

FireEye missed on the bottom line but beat on the top.

The cybersecurity company reported a loss per share of 1 penny versus analyst expectations for earnings of 1 penny.

Revenue was $217.6 million versus analyst expectations for revenue of $215.2 million.

Stock was taking a hit on weak forward guidance with the company projecting earnings per share between zero and 2 cents versus analyst expectations for earnings per share of 7 cents.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

FireEye Inc. Nasdaq: FEYE

Twitter Inc. NYSE: TWTR

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