High-grade convertibles weaken on GDP print; Rexford, NextEra lower; Vertex holds gains

By Abigail W. Adams

Portland, Me., April 25 – It was a volatile day in the convertibles secondary space on Thursday as the latest U.S. GDP print sparked heavy selling in markets early in the session.

Equity indexes slumped as Treasury yields climbed with a much softer-than-expected rate of economic growth reawakening recession fears while still strong inflationary figures reduced hopes for rate cuts.

“Can anyone say stagflation?” a source said.

While a heavy open, the market rebounded midway through the session with credit holding up better than expected.

The Dow Jones industrial average closed Thursday down 375 points, or 0.98%, the S&P 500 index closed down 0.46%, the Nasdaq Composite index closed down 0.64% and the Russell 2000 index closed down 0.74%.

While a down day for the market, trading activity was light with investment-grade issues again dominating the tape.

There was $74 million in reported convertibles trading volume about one hour into the session and $388 million on the tape in the late afternoon.

Investment-grade issues weaker in active trade with the two-year Treasury yield again surpassing 5%.

Rexford Industrial Realty, LP’s two tranches of exchangeable notes (Baa2/BBB+/BBB+) hit new outright lows early Thursday after firming earlier in the week.

NextEra Energy, Inc.’s 3% convertible notes due 2027 (Baa1/BBB+) also saw some selling pressure.

However, Vertex Inc.’s new 0.75% convertible notes due 2029 held onto the strong gains made on debut their second day in the secondary space.

Rexford’s new lows

Rexford’s two tranches of exchangeable notes again hit new outright lows amid the early morning heaviness in the market although they pared their losses into the close.

The 4.125% exchangeable notes due 2029 were off about 0.75 point outright to trade at 95.75 early in the session, a source said.

They were wrapped around 96 versus a stock price of $42.81 in the afternoon.

There was $15 million in reported volume.

While less active, the 4.375% exchangeable notes due 2027 broke below a 97-handle.

They traded down to 96.875 early in the session, a source said.

There was $2 million in reported volume.

Rexford’s stock traded to a low of $41.96 and a high of $43.05 before closing at $43, an increase of 1.08%.

NextEra under pressure

NextEra Energy’s 3% convertible notes due 2027 saw some selling pressure on Thursday with high-grade names weaker on the heels of the latest macro data.

The 3% convertible notes were off 1.25 points outright with stock in negative territory in intraday activity.

They were trading at 107.875 versus a stock price of $65.59, a source said.

There was $16 million in reported volume.

NextEra’s stock traded to a low of $65.51 and a high of $67.12 before closing at $66.90, up 0.51%.

Vertex Day 2

Vertex’s 0.75% convertible notes due 2029 were holding onto the strong gains made the previous session despite some heaviness in the market.

After dipping early in the session, the 0.75% convertible notes returned to a 105-handle.

They were trading at 105.375 versus a stock price of $29.41, a source said.

There was $10 million in reported volume.

Vertex’s stock traded to a low of $28.08 and a high of $29.46 before closing at $29.41, up 1.73%.

Vertex reopened the primary market with the pricing of an upsized $300 million issue of the 0.75% notes post-close on Tuesday.

The notes played to strong demand during book building and soared on their aftermarket debut on Wednesday with the notes trading up to 105 outright and expanding 2.5 points dollar-neutral.

Mentioned in this article:

NextEra Energy, Inc. NYSE: NEE

Rexford Industrial Realty Inc. NYSE: REXR

Vertex Inc. Nasdaq: VERX

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