Morning Commentary: Convertibles heavy as broader markets sink; Lumentum slips after strong debut

By Rebecca Melvin

New York, March 6 – U.S. convertibles were trading a little weaker early Monday as the latest batch of new issuance was being absorbed amid weakness in the broader markets, a New York-based trader said.

“With the market coming off, there is some weakness happening. On the whole, it’s not that bad, but it’s been a little weaker for choice,” the trader said at late morning on Monday.

Lumentum Holdings Inc.’s 0.25% convertibles, which debuted in the market on Friday, remained in action early on Monday and was among the names seeing a bit of weakness.

The Lumentum 0.25% convertibles due 2024, a $400 million new issue, were seen at 101.75 bid, 102.25 offered with the underlying shares at $46.10. That represented a decline of about 0.25 point on a dollar-neutral, or hedged, basis. But the notes were still ahead of the game since they had expanded about a point on swap on Friday.

The convertible primary market was busy last week with the addition of about $2 billion in new issuance in half a dozen new deals, including Viavi Solutions Inc.’s $400 million new issue of 1% convertibles due 2024 sold last Tuesday.

“Those names are all a little weaker,” the trader said.

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