Morning Commentary: Tesla convertibles seen better bid, though equity dips; summer doldrums in play

By Stephanie N. Rotondo

Seattle, July 10 – It continued to be the Tesla Inc. show on Monday in the convertible bond market as the previous week’s trend bled into the new week.

But while Tesla remained in focus, a trader noted that volume was once again limited.

“Volume is $42 million,” the trader said at mid-morning. “The whole rest of the summer will be like this.”

As for the goings-on in Tesla’s 0.25% convertible notes due 2019 and the 1.25% convertible notes due 2021, the trader said that while the underlying equity was softer, the bids in the convertibles were “better by 0.25 to 0.5 point.”

With the stock (Nasdaq: TSLA) at $306.05, the 0.25% convertibles were bid for at 106 and the 1.25% convertibles were at 105.5 bid.

On July 3, Tesla reported lower-than-expected deliveries for the second quarter, which resulted in investors pressuring the convertible bonds, as well as the equity.

However, there was a bit of a rebound on Friday, though the markets as a whole were trending higher.

Over the weekend, Elon Musk, the head of the electric car manufacturer, tweeted two photos of the first Model 3 off the production line. The sedan has been billed as the company’s most affordable model.

The first 30 vehicles will be handed over to customers on July 28. Another 100 are expected to be produced in August, with that number growing to over 1,500 in September and 20,000 in December.

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