Morning Commentary: Heavy convertibles trading continues; Luckin Coffee down outright

By Abigail W. Adams

Portland, Me., Jan. 21 – The convertibles secondary space continued to see above-average trading volume in the truncated holiday week.

There was about $74 million in reported volume less than one hour into Tuesday’s session, a market source said.

“Volume’s been steady,” a market source said. “There’s been a lot of jiggering around of portfolios.”

Booking Holdings Inc.’s convertible notes were active early in the session.

The 0.9% convertible notes due 2021 topped the volume charts with about $7.5 million on the tape less than one hour into the session.

The notes were changing hands around 114.75, a market source said.

The soon-to-mature 0.35% convertible notes due June 15, 2020 also saw a large trade. The notes changed hands at 151.375 with $2.8 million in a single trade, sources said.

Booking Holdings’ stock was $1,999.62, a decrease of 2.68%, shortly before 11 a.m. ET.

Luckin Coffee Inc.’s 0.75% convertible notes due 2025 continued to top the volume charts with the notes coming in on an outright basis as equity sank alongside the broader market.

The 0.75% convertible notes dropped about 3 points outright. They were changing hands at 112.5 early in the session with about $5.5 million in reported volume.

The notes were moving in line on a dollar-neutral, or hedged, basis, a market source said.

The Beijing-based coffee shop chain’s ADS dropped to $48.185, a decrease of 3.67%, shortly before 11 a.m. ET.

The ADS of several China-based convertibles were taking a hit on Tuesday as a flu-like illness spreading through China weighed down markets.

While the broader markets were down, Tesla Inc.’s convertible notes remained active and continued to move higher as stock climbed another 30 points early in Tuesday’s session.

The 2% convertible notes due 2024 rose to 187.625 with $4 million in reported volume early in the session.

The 1.25% convertible notes due 2021 traded up to 157.

Tesla stock continued its upward momentum on Tuesday. Stock was $542.50, an increase of 6.27%, shortly before 11 a.m. ET.

Stock passed $500 as recently as last week and has steadily climbed following the opening of the electric car manufacturer’s Shanghai facility.

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