Morning Commentary: Rivian convertibles continue to see volatility, drop below par

By Abigail W. Adams

Portland, Me., Oct. 9 – It was a quiet start to the day in the convertibles secondary space with the bond market closed for the Columbus Day/Indigenous Person’s Day holiday in the United States and equity markets lower as another unforeseen geopolitical situation rattled markets.

Equity indexes were in the red in light volume on Monday, although sources were surprised at how well the market was holding up as Israel and Hamas again go to war stoking concerns about a more widespread regional and international conflict.

The Dow Jones industrial average was down 133 points, or 0.40%, the S&P 500 index was down 0.52%, the Nasdaq Composite index was down 0.88% and the Russell 2000 index was down 0.27% shortly before 11 a.m. ET.

The conflict sparked a surge in oil futures with WTI Crude futures up to $86.61, an increase of 4.65%, shortly before 11 a.m. ET.

The run up in crude oil futures, which blew past $90 in late September, are an inflationary headwind and have contributed to the market repricing for future rate hikes and a higher-for-longer rate environment, sources said.

While equity markets were lower as the world watches the situation unfold in the Middle East, the convertibles secondary space was quiet.

There was $43 million in reported volume about one hour into the session with few names seeing concentrated trading activity.

While activity surrounding Rivian Automotive Inc.’s new 3.625% convertible notes due 2030 tempered, the notes remained volatile on an outright basis and dropped back below par with stock again dropping lower.

The notes sank about 3 points outright with stock off 5%.

The notes fell back to a 98-handle and were changing hands at 98.125 versus a stock price of $17.90 shortly before 11 a.m. ET, according to a market source.

There was $6 million in reported volume.

Rivian’s stock was seen at $17.88, a decrease of 5.5%, shortly before 11 a.m. ET.

Rivian’s 3.625% convertible notes were volatile on their market debut last Friday with the notes ricocheting from 96 to 101 in a single session.

However, they were holding well on hedge with the notes contracting only about 0.25 point to 0.5 point dollar-neutral.

The $1.5 billion issue, which priced at par on Oct. 5, was placed largely with hedge accounts, which accounted for about 70% of the allocation, a source said.

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