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Morning Commentary: High-grade convertible notes continue to drive volume
By Abigail W. Adams
Portland, Me., April 2 – The convertible bond secondary space had an uptick of activity on Tuesday with high-grade names again the driving force of volume.
Equity indexes were in the red early Tuesday as markets digested the latest JOLTS report and forecasts about the economic impact of the U.S.’s debt.
Fears about the strength of the economy were beginning to resurface, a source said.
The Dow Jones industrial average was down 419 points, or 1.06%, the S&P 500 index was down 1.04%, the Nasdaq Composite index was down 1.46% and the Russell 2000 index was down 1.73% shortly before 11 a.m. ET.
There was $148 million in reported volume about one hour into the session with the top five traders accounting for almost 50% of the total activity in the space.
And they were all high-grade names.
NextEra Energy Capital Holdings Inc.’s 3% exchangeable notes due 2027 (Baa1/BBB+) was the top traded name in the space with the notes lower alongside stock.
The notes were off about 0.5 point outright with stock down 0.5%.
They were changing hands at 106.25 versus a stock price of $62.76 early in the session, according to a market source.
There was $25 million in reported volume.
NextEra stock was trading at $63.09, a decrease of 0.46%, shortly before 11 a.m. ET.
Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) also remained a top volume mover with the notes stronger outright alongside stock.
The 3.875% convertible notes were trading at 99.625 versus a stock price of $71.66.
There was $18 million in reported volume.
Southern Co.’s stock was trading at $71.97, an increase of 1.22%, shortly before 11 a.m. ET.
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