Convertibles trading light; Microchip trades below par; Square drops on stock plunge

By Abigail W. Adams

Portland, Me., March 16 – The convertibles secondary space was bracing itself for another volatile week with volume light on Monday as equity trading was again halted after the S&P 500 index hit its limit-down circuit breaker shortly after the opening bell.

When trading resumed, indexes extended their losses with the Dow Jones industrial average closing the day down 12.93%, the S&P 500 down 11.98% and the Nasdaq composite down 12.32%.

Illiquidity took hold of the convertible secondary space on Monday with many watching the plummet in equities from the sidelines.

There was $33 million in reported volume about one hour after the opening bell and $381 million heading into the late afternoon.

“The market is frozen,” a source said.

Many accounts were continuing to hold their positions in the hope that the market would recover.

For the activity that did occur, accounts were trading into the bid.

Microchip Technology Inc.’s 1.625% convertible notes due 2027 were one of the most actively traded names of Monday’s session with the notes dropping below par.

U.S. Steel Corp.’s 5% convertible notes due 2026 again traded down with the notes losing more than 30 points over the past two weeks.

Square Inc.’s convertible notes continued their downward spiral in active trading as stock suffered its worst single-day loss in the company’s history.

Microchip below par

Microchip’s 1.625% convertible notes due 2027 were one of the most actively traded issues in the secondary space.

The notes dropped more than 5 points outright to change hands at 93.75 in the late afternoon, according to a market source.

The bonds saw more than $12 million in reported volume in the late afternoon.

The level was the lowest outright price for the notes since the market rout of October 2018.

While less active, Microchip’s 1.625% convertible notes due 2025 were down 7 points outright to 127 in the late afternoon.

Microchip stock traded to a high of $65.70 before closing the day at its intraday low of $55.77, which was a decrease of 20.29%.

U.S. Steel tanks

U.S. Steel’s 5% convertible notes due 2026 continued their downward trajectory on Monday.

The 5% notes dropped more than 9 points outright to trade on a 60-handle, according to a market source.

U.S. Steel’s stock traded to a low of $4.54 but closed Monday to its intraday high of $5.32, a decrease of 1.75%.

The notes have crumbled alongside stock in the market sell-off over the past two weeks.

They were trading in the low 90s the first week of March, according to Trace data.

U.S. Steel stock fell almost 30% last week. U.S. Steel stock was $10.48 when the 5% convertible notes priced in October 2019.

Square down again

Square’s convertible notes continued their downward momentum on Monday as stock tanked more than 20%.

Square’s 0.5% convertible notes due 2023 were active with the notes hitting their lowest level since pricing in May 2018.

The notes were down almost 8 points outright to close the day at 96.5.

There was more than $11 million in reported volume by the late afternoon.

While volume was light, Square’s recently priced 0.125% convertible notes due 2025 continued their downward spiral.

The notes traded down to close Monday at 83.125.

Square stock traded to a high of $49.25 and a low of $40.00 before closing the day at $41.27, a decrease of 28.54%.

It was the worst day for Square stock in its history.

Square stock has been slashed in half over the past month. Stock was $80.67 when the San Francisco-based financial services and mobile payment company priced $1 billion of the 0.125% convertible notes on March 3.

Mentioned in this article:

Microchip Technology Inc. Nasdaq: MCHP

Square Inc. NYSE: SQ

U.S. Steel Corp. NYSE: X

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