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Morning Commentary: Convertibles secondary at a crawl as volatility returns to markets
By Abigail W. Adams
Portland, Me., Feb. 5 – The convertibles secondary space was at a crawl early Monday with volatility returning to markets.
Equity indexes fell while Treasury yields soared as markets digested Federal Reserve chair Jerome Powell’s “60 Minutes” interview.
Powell continued to stress Fed officials’ commitment to caution and patience before engaging in rate cuts, which pointed to an overshoot in market expectations.
The Dow Jones industrial average was down 346 points, or 0.90%, the S&P 500 index was down 0.75%, the Nasdaq Composite index was down 0.91% and the Russell 2000 index was down 2% shortly before 11 a.m. ET.
The 10-year Treasury yield climbed 14.5 basis points to 4.168% shortly before 11 a.m. ET.
There was $42 million in reported convertible bond trading volume about one hour into the session with only one issuing seeing more than $5 million on the tape.
And that issue was investment grade.
CenterPoint Energy Inc.’s 4.25% convertible notes due 2026 (Baa2) were the top traded issue early in the session with the notes weaker amid the move in Treasuries.
The 4.25% notes were off about 0.375 point outright.
The notes were trading at 99.375 versus a stock price of $27.94 early in the session, according to a market source.
There was $8 million in reported volume.
CenterPoint’s stock was trading at $27.62, a decrease of 1.18%, shortly before 11 a.m. ET.
While convertible bond trading was quiet early Monday, several convertible issuers saw large movements in their stock with the solar industry taking a hit across the board.
Sunnova Energy International Inc.’s 2.625% convertible notes due 2028 were unmoved early Monday after dropping 4 points outright the previous session to a 50-handle.
Sunnova’s stock was trading at $8.84, a decrease of 10.71%, shortly before 11 a.m. ET.
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