Morning Commentary: Lumentum convertibles active on profit-taking; equities volatile

By Abigail W. Adams

Portland, Me., Jan. 11 – The convertibles secondary space was active early Tuesday as volatility continued to roil equity markets.

Indexes were mixed early in the session as market players eyed Federal Reserve chair Jerome Powell’s congressional testimony for clues about the pace of rate hikes.

While the Nasdaq Composite and Russell 2000 index showed signs of a rebound early in the session, they joined the S&P 500 index and Dow Jones industrial average in negative territory as the session progressed.

The Dow was down 181 points, or 0.5%, the S&P 500 was down 0.4%, the Nasdaq Composite was down 0.29%, and the Russell 2000 was down 0.34% shortly before 11 a.m. ET.

The 10-year Treasury yield was largely flat early in the session, although it began to inch higher as Powell’s testimony began.

The yield was 1.85% shortly before 11 a.m. ET.

There was almost $100 million in reported convertible bond trading early in the session, although there was a wide selection of names on the tape.

Topical news and portfolio rebalancing were the drivers of activity in the space.

Lumentum Holdings Inc.’s 0.5% convertible notes due 2026 were active early in the session.

The notes were changing hands at 124 versus an equity price of $106.19 early in the session, a source said.

There was about $8 million in reported trading volume.

Lumentum’s stock wavered between gains and losses early in the session. It traded down to $105.20, a decrease of 0.84%, shortly before 11 a.m. ET.

The activity in the name was most likely the result of profit-taking, a source said.

In December, when the tech sector was taking a beating, Lumentum’s stock outperformed and rose more than 25%.

The 0.5% convertible notes gained more than 10 points outright over December as stock surged.

“They’ve definitely taken a run,” a source said.

With the market down over the past month, holders were most likely using it as an opportunity to lock in profits.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.