Morning Commentary: High-grade convertibles return to focus; MicroStrategy shoots higher

By Abigail W. Adams

Portland, Me., March 11 – The convertibles primary and secondary markets were off to a slow start on Monday with no new deals launching and trading activity surrounding the deluge of deals from the previous week settling.

The convertibles primary market is expected to continue to operate at an active pace throughout the week although Tuesday’s release of the Consumer Price Index report, which has the making of a high vol. event, may be an obstacle to issuance early in the week, sources said.

Equity indexes were weak as Treasury yields crept higher in the run up to the latest inflationary data, which will test market expectations for the start of rate cuts.

The Dow Jones industrial average was down 195 points, or 0.50%, the S&P 500 index was down 0.33%, the Nasdaq Composite index was down 0.14% and the Russell 2000 index was down 0.68% shortly before 11 a.m. ET.

There was $83 million in reported convertible bond trading volume about one hour into the session with high-grade names again driving activity in the space.

NextEra Energy Capital Holdings Inc.’s recently priced 3% exchangeable notes due 2027 (Baa1/BBB+) continued to improve in heavy volume after a relatively flat aftermarket debut.

Federal Realty OP LP’s 3.25% exchangeable notes due 2029 were also improved in heavy volume.

MicroStrategy Inc.’s convertible notes continued their meteoric rise as stock hit a new 52-week high with Bitcoin hitting a new all-time high.

Gainers

NextEra’s recently priced 3% exchangeable notes due 2027 continued to improve in heavy volume on Monday after a relatively flat aftermarket debt.

The 3% notes inched up about 0.25 point outright with stock off to start the day.

The 3% notes were changing hands at 102.5 versus a stock price of $57.81 early in the session, according to a market source.

There was $20 million in reported volume.

NextEra’s stock was trading at $57.04, a decrease of 1.33%, shortly before 11 a.m. ET.

Federal Realty’s 3.25% exchangeable notes due 2029 were also improved.

The notes added about 0.25 point outright with stock also in the red to start the session.

The 3.25% notes were changing hands at 97.25 versus a stock price of $102.49 early in the session, according to a market source.

There was $12 million in reported volume.

Federal Realty’s stock was trading at $101.73, a decrease of 0.43%, shortly before 11 a.m. ET.

MicroStrategy higher

MicroStrategy’s convertible notes continued their meteoric rise as stock hit a new 52-week high with Bitcoin at a new all-time high.

The 0% convertible notes due 2027 were the most active tranche early in the session with the notes adding 5 points outright with stock up almost 10%.

The 0% notes were trading at 127.375 versus a stock price of $1,527 early in the session.

There was $6 million in reported volume.

The 0.625% convertible notes due 2030, which priced on March 5, jumped 6 points outright.

They were trading at 124.75 versus a stock price of $1,546.

“I cannot believe they’re trading here already,” a source said.

There was $3 million in reported volume.

MicroStrategy’s stock was trading at $1,571.50, an increase of 10.24%, shortly before 11 a.m. ET.

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