Caution reigns amid equity rally; Booking Holdings below par; Tesla up; Atlassian active

By Abigail W. Adams

Portland, Me., March 19 – Caution was king in the convertibles secondary space on Thursday as equities staged a midday rally led by the tech sector.

The caution was warranted with indexes erasing the majority of their gains by the market close.

The Dow Jones industrial average closed the day up 0.95%, the S&P 500 index closed up 0.47% and the Nasdaq composite closed up 2.3%.

Bargain shoppers in the tech sector pushed up the equities of several convertible issuers.

However, the rally did little to lift the secondary space.

“You’re getting more price discovery than improvement,” a source said.

Trading volume remained muted with $74 million in reported volume about one hour into the session and $600 million at the market close, sources said.

Activity remained relegated to liquid issues and better credits, a market source said.

“People are still being cautious. They’re picking their spots on what they’re selling,” a market source said.

The major volume movers on Thursday were mostly equity sensitive bonds, a source said.

Booking Holdings Inc.’s convertible notes continued to dominate the volume charts with both tranches continuing to contract and the dollar price of the 0.9% convertible notes due 2021 sinking below par.

Tesla Inc.’s convertible notes saw some action with the notes gaining on an outright basis following a large stock move.

Atlassian Corp. plc’s 0.625% convertible notes due 2023 were also active as the software company’s stock rallied.

Deutsche Bank AG, London Branch’s 1% cash-settled equity linked notes due 2023 tied to Voya Financial, Inc. were volume movers on Thursday.

While the notes saw only three trades, there was $15 million in reported volume, according to a market source.

The 1% notes were changing hands at 93.75.

Voya stock traded to a high of $35.54 and a low of $32.98 before closing the day at $33.62, a decrease of 4.97%.

Booking Holdings comes in

Booking Holdings’ convertible notes once again topped the volume charts on Thursday with the notes continuing to lose ground in the high-volume activity.

The 0.35% convertible notes due June 15, 2020 were changing hands at 106 versus a stock price of $1,191.40 in the late afternoon.

They were contracted about 0.25 point, a market source said.

With the notes maturing in less than four months, they have not moved much dollar-neutral, the source said.

The 0.35% notes saw more than $42 million in reported volume.

Booking’s 0.9% convertible notes due 2021 dropped below par on an outright basis on Thursday.

The notes were changing hands between 99.5 and 99.75 for the majority of the session.

However, they traded as low as 98.5 versus a stock price of $1,195.86 shortly before the market close.

They were contracted about 1 point dollar-neutral, a market source said.

The 0.9% notes saw more than $26 million in reported volume.

Booking Holdings stock traded to a high of $1,236.64 and a low of $1,150 before closing the day at $1,191.48, a decrease of 3.43%.

Tesla gains

Tesla’s convertible notes saw a resurgence of activity on Thursday as stock soared amid a rally in the tech sector.

Tesla’s 1.25% convertible notes due 2021 traded up more than 15 points outright.

They were changing hands at 136 versus a stock price of $426.53 in the late afternoon, according to a market source.

There was about $12 million of the bonds on the tape by the late afternoon.

The 2.375% convertible notes due 2022 also jumped about 15 points outright.

They were changing hands at 147 versus a stock price of $436.54 in the late afternoon.

The notes saw about $10 million in reported volume.

However, the 2% convertible notes due 2024 saw light volume compared to the other tranches with the notes largely trading sideways at 134.75.

Tesla stock traded to a low of $358.46 and a high of $452.00 before closing the day at $427.64, an increase of 18.39%.

Stock spiked following an upgrade from Morgan Stanley analyst Adam Jonas. While stock was upgraded to “equal weight” from “underweight,” Jonas slashed the price target to $460 from $480.

Atlassian active

Atlassian’s 0.625% convertible notes due 2023 were active as the software company’s stock rallied in the mid-afternoon.

The 0.625% notes jumped more than 12 points outright.

The notes were trading just shy of 163 versus a stock price of $127.50 in the late afternoon, according to a market source.

The notes saw $12 million in reported volume.

While the 0.625% notes rallied with stock up as much as 5% in the mid-afternoon, stock dropped heading into the market close, ending the day in negative territory.

Atlassian stock traded to a high of $130.56 and a low of $116.51 before closing the day at $121.56, a decrease of 0.39%.

Mentioned in this article:

Atlassian Corp. plc Nasdaq: TEAM

Booking Holdings Inc. Nasdaq: BKNG

Tesla Inc. Nasdaq: TSLA

Voya Financial, Inc. NYSE: VOYA

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