Morning Commentary: Palo Alto convertible notes active in early trading on quiet morning

By Abigail W. Adams

Portland, Me., Jan. 24 – It was a slow start to the day in the convertibles secondary space as equities pulled back from the strong gains made over the past two sessions.

The Dow Jones industrial average was down 20 points, or 0.06%, the S&P 500 index was down 0.24%, the Nasdaq Composite index was down 0.24% and the Russell 2000 index was down 0.31% shortly before 11 a.m. ET.

There was $70 million in reported convertibles trading volume about one hour into the session with only two issues seeing more than $5 million in reported volume.

Wayfair Inc.’s 3.25% convertible notes due 2027 remained actively traded with the notes continuing to log outright gains as stock pulled back after a more than 40% gain over two sessions.

The 3.25% notes were changing hands at 118.5 versus a stock price of $58.20 early in the session, according to a market source.

There was $6 million in reported volume.

Wayfair’s stock was seen at $57.58, a decrease of 2.95%, shortly before 11 a.m. ET.

Palo Alto Networks Inc.’s 0.375% convertible notes due 2025 were also active.

The 0.375% convertible notes rose 2 points outright with stock up about 1%.

The notes were trading at 156.875 versus a stock price of $151.05 early in the session, according to a market source.

There was $6 million in reported volume.

Palo Alto’s stock was seen at $150.57, an increase of 0.82%, shortly before 11 a.m. ET.

The notes were most likely moving on a JPMorgan analyst initiation of the stock with an overweight rating and a price target of $195, a source said.

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