Morning Commentary: Convertibles trading volume light; Wayfair notes drop with stock

By Abigail W. Adams

Portland, Me., Dec. 17 – Trading volume was light in the convertibles secondary space early in Monday’s session as equities stood poised for another volatile session.

There was $41 million on the tape about an hour after the opening bell with few names seeing concentrated trading activity.

Wayfair Inc.’s 1.125% convertible notes due 2024 were among the most actively traded issues in the secondary space as stock continued to come in from its post-holiday shopping report bounce.

The 1.125% convertible notes dropped more than 4 points outright to trade at 105.875, a market source said. More than $4 million of the bonds were on the tape.

Wayfair stock dropped more than 6% early in Monday’s session.

Markets remained volatile on Monday with the Dow Jones industrial average opening down 300 points but paring its losses to a 150-point drop shortly before 11 a.m. ET.

Investors are taking defensive positions with large cash outflows from equities, a market source said.

Shorter duration, high-yield names remained a focus of trading activity.

Prospect Capital Corp.’s 4.75% convertible notes due April 15, 2020 saw some action on Monday with the notes trading at 99.25, a market source said.

The business development company’s 5.875% convertible notes due on Jan. 15, 2019 have also seen an uptick in activity as its maturity date approaches.

The notes changed hands at 99.75 in light volume on Monday.

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