Morning Commentary: Convertibles mostly lift with stocks after vaccine news; American jumps

By Rebecca Melvin

New York, July 15 – Many convertibles traded higher on an outright basis in tandem with U.S. stocks early Wednesday after news of a promising coronavirus vaccine study.

The new Moderna study showed 45 patients in its early-stage human trial produced a desired immune response.

Convertibles issues in the airline space got a boost from the news. American Airlines Group Inc.’s 6.5% convertible notes due 2025, which had been dragging lower this week, snapped back. The bond was up 6.75 points early Wednesday to 90, according to Trace data.

Southwest Airlines Co.’s 1.25% convertibles due 2025 were up three points to 122.6. Shares of the Dallas-based airline jumped $2.02, or 6.1%, to $35.27.

The 0.25% convertibles of Pioneer Natural Resources Co. were trading actively atop the Trace most-actives list. The paper due 2025 was up 2.6 points to 119.358 versus the underlying shares, which had been up by more than 1%, but were most recently up 45 cents, or 0.5%, at $96.15. The oil and natural gas company is based in Irving, Texas.

The new Atlantica Sustainable Infrastructure Jersey Ltd. exchangeable was not heard in trade. The company priced $100 million of the five-year green exchangeable senior notes with a 4% coupon and a 20% initial exchange premium late Tuesday.

Trip.com Group Ltd.’s notes that are exchangeable into shares of Huazhu Group Ltd. moved up again and were seen to have traded with a 107 handle early Wednesday.

The new Trip.com/Huazhu exchangeable priced late Monday with a 1.5% coupon and 20% premium. They were seen to have traded at 102.5 on Tuesday. The Huazhu shares gained 96 cents, or 2.8% in the early going on Wednesday to $35.38. On Tuesday the stock was up 79 cents, or 2.5% on the day.

There were some names that were lower however. DocuSign Inc.’s 0.5% notes due 2023 traded at 268.6, which was down 4.7 points, versus shares, which were down $4.20, or 2.3%, to $192.00.

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