Convertibles secondary flat; investment-grade notes dominate; PPL gains; Freshpet active

By Abigail W. Adams

Portland, Me., April 11 – The convertibles primary market was dormant and the secondary space flat on Tuesday as markets await the next catalyst for movement.

Equity indexes were again mixed but with Treasuries largely unchanged.

“There are no themes,” a source said. “No one knows what to do.”

However, that may change following Wednesday’s release of the Consumer Price Index report as the market attempts to gauge the Federal Reserve’s next move.

The Dow Jones industrial average closed Tuesday up 98 points, or 0.29%, the S&P 500 index closed flat, the Nasdaq Composite index closed down 0.43% and the Russell 2000 index closed up 0.80%.

There was $49 million in reported convertibles trading volume about one hour into the session and $472 million in reported volume about one hour before the market close.

Investment-grade convertible notes remained the trade of the day with Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) and Southern Co.’s 3.875% convertible notes due 2025 (Baa2/BBB) accounting for the lion’s share of activity in the space.

While Duke’s and Southern Co.’s convertible notes were largely unchanged, PPL Corp.’s 2.875% exchangeable notes due 2028 (Baa1/BBB+) gained strength.

Freshpet Inc.’s 3% convertible notes due 2028 also improved in active trading during Tuesday’s session.

Unchanged

Duke Energy’s 4.125% convertible notes due 2026 and Southern Co.’s 3.875% convertible notes due 2025 continued to dominate the tape although with little movement in price.

Duke’s 4.125% notes traded in a tight range around 101.875, a source said.

The notes were seen changing hands just north of 101.875 versus a stock price of $99.59 in the late afternoon.

There was $42 million in reported volume.

Duke’s stock traded to a low of $98.65 and a high of $99.60 before closing at $99.35, up 0.22%.

Southern Co.’s 3.875% convertible notes remained wrapped around 102.

There was $35 million in reported volume.

Southern Co.’s stock traded to a low of $71.39 and a high of $72.14 before closing at $71.83, a decrease of 0.29%.

PPL gains

PPL’s 2.875% exchangeable notes due 2028 were gaining steam in heavy volume on Tuesday.

The notes rose 0.5 point outright.

The notes were seen at 101.125 versus a stock price of $28.92 in the late afternoon, according to a market source.

There was $17.5 million in reported volume.

PPL’s stock traded to a high of $28.93 and a low of $28.54 before closing at $28.83, up 0.66%.

PPL’s convertible notes were the underperformers of the investment-grade issuance of 2023.

The notes traded down to a 96-handle in early March but recouped their losses and closed the previous week on a par-handle.

Freshpet active

Freshpet’s 3% convertible notes due 2028 improved in active trade on Tuesday.

The notes were unchanged outright with stock down more than 1%.

By the late afternoon, they were trading at 117.5 versus a stock price of $65.87, according to a market source.

There was $9 million in reported volume.

Freshpet’s 3% convertible notes have been the best performing new deal of the year with the notes making strong outright and dollar-neutral gains since the $350 million issue priced at par on March 15.

Mentioned in this article:

Duke Energy Corp. NYSE: DUK

Freshpet Inc. Nasdaq: FRPT

PPL Corp. NYSE: PPL

Southern Co. NYSE: SO

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