Convertibles secondary quiet amid market swings; Enovis climbs higher; Okta lower

By Abigail W. Adams

Portland, Me., Oct. 23 – It was a slow start to the week in the convertibles secondary space as activity surrounding new issuance dwindled and broader markets remained indecisive about the future of interest rates.

Equity indexes saw a heavy open after the 10-year Treasury yield broached the 5% threshold with markets pricing in a higher for longer rate environment.

However, indexes pared their losses and briefly shot into positive territory as buyers returned to Treasuries and knocked the 10-year Treasury yield off its high.

Pershing Square Capital CEO Bill Ackman’s announcement that he had covered his short in Treasuries led others to do the same, sparking the midday turnaround in markets.

However, the midday glimmer in equities faded with sellers dragging down indexes into the close.

While the Nasdaq Composite was able to hold some gains, the Dow Jones industrial average and Russell 2000 index closed near the session lows.

The Dow closed Monday down 191 points, or 0.58%, the S&P 500 index closed down 0.17%, the Nasdaq Composite index closed up 0.27% and the Russell 2000 index was closed down 0.86%.

There was $40 million in reported volume about one hour into the session and $180 million on the tape in the late afternoon with few names seeing concentrated trading activity.

High-grade names continued to dominate the tape with CMS Energy Corp.’s 3.375% convertible notes due 2028 (Baa2), Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB), Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) the names in focus.

The notes continued to hold in well amid the rate volatility.

While activity tempered, Enovis Corp.’s new 3.875% convertible notes due 2028 saw some action with the notes continuing to climb their second day in the secondary space.

Topical news also sparked some activity in Okta Inc.’s convertible notes, which were lower as stock took a hit on the heels of a data breach.

High-grade trades

High-grade names continued to dominate trading with the notes holding up well amid the volatility in rates.

CMS Energy’s 3.375% convertible notes due 2028, among the weakest performers of high-grade issues, held steady in heavy volume.

The notes were changing hands just north of 93.875 versus a stock price of $53.06 in the late afternoon.

The yield was 4.875%.

There was $9.5 million in reported volume.

CMS Energy’s stock traded to a low of $52.12 and a high of $53.34 before closing at $52.61, down 0.57%.

Duke Energy’s 4.125% convertible notes due 2026 were wrapped around 97 with stock trading at $86.78.

The yield was about 5.375%.

There was $7.5 million in reported volume.

Duke Energy’s stock traded to a low of $85.79 and a high of $87.62 before closing at $86.33, down 0.80%.

Southern Co.’s 3.875% convertible notes due 2025 were trading at 97.75 versus a stock price of $65.77.

There was $7 million in reported volume.

Southern Co.’s stock traded to a high of $66.23 and a low of $64.53 before closing at $65.43, off 0.46%.

Enovis day 2

Enovis’ 3.875% convertible notes due 2028 continued to strengthen on an outright and dollar-neutral basis their second day in the secondary space.

The notes rose another 1.625 points outright with stock up 2.5%.

They were changing hands at 103.25 versus a stock price of $45.54 in the late afternoon.

The convertibles expanded dollar-neutral on the move up.

There was $8 million in reported volume.

Enovis’ stock traded to a low of $44.36 and a high of $45.88 before closing at $45.53, up 2.38%.

Enovis’ 3.875% convertible notes have performed well since hitting the aftermarket last Friday with the notes expanding 1.5 points on debut.

Okta lower

Okta’s high-premium convertible notes were active early in the session with the notes lower outright as stock fell more than 7% after the cybersecurity company disclosed a data breach.

Okta’s 0.125% convertible notes due 2025 were down about 1 point outright.

The notes were trading at 89.75 versus a stock price of $69.82 early in the session, according to a market source.

They were changing hands at 89.5 in the late afternoon.

The yield was just shy of 6.25%.

There was $5 million in reported volume.

Okta’s 0.375% convertible notes due 2026 were down 1.5 points outright.

They were seen at 85.875 versus a stock price of $69.71.

The yield was also about 6.25%.

There was $2 million in reported volume.

Okta’s stock traded to a low of $67.80 and a high of $70.75 before closing at $69.42, a decrease of 8.14%.

Okta’s stock took a hit after the identity and access management software company disclosed unidentified hackers had accessed customer files through stolen credentials.

Mentioned in this article:

CMS Energy Corp. NYSE: CMS

Duke Energy Corp. NYSE: DUK

Enovis Corp. NYSE: ENOV

Southern Co. NYSE: SO

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