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Morning Commentary: Convertibles secondary active as equities sell off; Fortive eyed
By Abigail W. Adams
Portland, Me., Sept. 21 – The convertibles secondary space was relatively active early in Monday’s session as the sell-off in equities intensified.
The Dow Jones industrial average was down 817 points, or 2.93%, the S&P 500 index was down 2.42% and the Nasdaq composite was off 2.1% shortly before 11 a.m. ET.
There was $84 million on the tape about one hour into Monday’s session.
Fortive Corp.’s 0.875% convertible notes due 2022 dominated the tape with almost $15 million in reported volume.
However, the notes were little changed in the high-volume activity.
The investment-grade rated notes were changing hands at 100.875 early in the session, a source said.
Fortive’s stock traded down to $73.29, a decrease of 3.27%, shortly before 11 a.m. ET.
The notes looked optically unattractive with a negligible yield to maturity and a high premium.
However, the fair value of the notes modeled out to around 102, a source said.
With the investment-grade rating, Fortive’s notes are popular with European accounts, which tend to hold issues until their maturity, a source said.
Illumina Inc.’s convertible notes also remained active with the notes trading down on an outright basis as stock continued to sell off.
Illumina’s 0.5% convertible notes due 2021 traded down 8 points outright with stock off more than 8%.
The notes were changing hands at 117.75 with about $9 million on the tape early in the session, a source said.
Illumina’s 0% convertible notes due 2023 were down 2 points outright to 104.625, a source said.
Illumina stock was $271.08, a decrease of 8.26%, shortly before 11 a.m. ET.
Stock has been on a downward spiral since news broke about the company’s intention to acquire Grail Inc.
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