High-grade convertible notes come in amid weak market conditions; Exact Sciences firms

By Abigail W. Adams

Portland, Me., April 2 – The convertible bond primary market was dormant on Tuesday with little expected from the week.

The pace of issuance is expected to be slow in the weeks ahead with issuers in earnings season blackouts.

Meanwhile, it was a soft day in the secondary space on Tuesday with equities under pressure as the latest round of macro data sparked a risk-off sentiment through markets.

The latest JOLTS report came in slightly above expectations; however, there were signs of a cooling labor market in the report.

With the Consumer Price Expenditure report still reflecting stubborn inflation and signs of a cooling economy, fears about a stagflation scenario were beginning to resurface, a source said.

The Dow Jones industrial average closed Tuesday down 397 points, or 1%, the S&P 500 index was down 0.72%, the Nasdaq Composite index closed down 0.95% and the Russell 2000 index closed down 1.8%.

The secondary space was broadly down about 0.375 point under the heavy market conditions, a source said.

There was $148 million in reported volume about one hour into the session and $500 million on the tape in the late afternoon with high-grade names the driving force of volume.

NextEra Energy Capital Holdings Inc.’s 3% exchangeable notes due 2027 (Baa1/BBB+), Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB), and Global Payments Inc.’s 1.5% convertible notes due 2031 (Baa3/BBB-) were among the most actively traded issues in the space with investment-grade issues weaker across the board

Exact Sciences Corp.’s convertible notes were once again movers and shakers in the space with the notes firming as stock shot up due to a disappointing clinical trial from a competitor.

High-grade comes in

It was another day of investment-grade trades on Tuesday with high-grade issues dominating the tape.

Investment-grade names were weaker across the board with issues coming in 0.25 to 0.375 point dollar-neutral under Tuesday’s heavy market conditions.

NextEra Energy’s 3% exchangeable notes due 2027 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 with activity in the name diminishing in the afternoon, a source said.

There was $25 million in reported volume.

NextEra stock traded to a low of $62.36 and a high of $63.34 before closing the day at $62.88, a decrease of 0.79%.

Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) also remained a top volume mover.

The 3.875% convertible notes were trading at 99.625 early in the session and 99.5 in the late afternoon.

There was $24 million in reported volume.

Southern Co.’s stock traded to a low of $71.09 and a high of $72.08 before closing the day at $71.34, an increase of 0.34%.

Global Payments’ 1.5% convertible notes due 2031 were off about 1.25 points outright with stock down about 1.5%.

They were trading at 99.5 versus a stock price of $127.97 in the late afternoon, according to a market source.

There was $22 million in reported volume.

Global Payments traded to a low of $127.78 and a high of $129.22 before closing the day at $128.36, a decrease of 1.38%.

Exact Sciences firms

Exact Sciences’ convertible notes were again moving on Tuesday as stock shot higher after a competitor released disappointing clinical results.

The 2% convertible notes due 2030 gained 3 points outright to trade at 117.5 in the late afternoon.

The 0.375% convertible notes due 2028 added 2 points outright to trade at 95.625.

The 0.375% convertible notes due 2027 were also up about 2 points outright to trade at 98.125.

While Exact Sciences’ longer-duration notes were largely moving inline dollar-neutral, the 0.375% notes due 2027 added about 0.25 point dollar-neutral, a source said.

Exact Sciences’ stock traded to a low of $73.16 and a high of $79.62 before closing the day at $73.74, an increase of 4.73%.

Stock hit its highest level of the year on Tuesday after competitor Freenome released disappointing results for a blood-based colorectal cancer screening test that would have rivaled Exact Sciences’ flagship Cologuard product.

While dollar-neutral gains were minimal on Tuesday, Exact Sciences’ convertible notes had a large move the previous week amid a runup in stock.

The convertible notes expanded 1 to 3 points dollar-neutral the previous week, a source said.

Mentioned in this article:

Exact Sciences Corp. Nasdaq: EXAS

Global Payments Inc. NYSE: GPN

NextEra Energy Partners LP NYSE: NEP

Southern Co. NYSE: SO

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