Convertibles under pressure; Illumina further below par; Coinbase tumbles to new low

By Abigail W. Adams

Portland, Me., June 13 – It was a brutal day in the convertibles secondary space on Monday as equities continued to get pummeled following Friday’s Consumer Price Index report.

The S&P 500 index officially entered into bear market territory and the 10-year Treasury yield hit a new multi-year high as the market reassessed the Federal Reserve’s rate hike schedule ahead of the Federal Open Market Committee meeting on Tuesday.

The Dow Jones industrial average closed down 876 points, or 2.79%, the S&P 500 index closed down 3.88%, the Nasdaq Composite index closed down 4.68% and the Russell 2000 index closed down 4.76%.

The 10-year Treasury yield settled Monday at 3.366% after trading as high as 3.439% in intraday activity.

There was $34 million in reported volume about one hour into the session and $400 million on the tape about one hour before the market close with sellers firmly in control.

The secondary space, on average, contracted 2 points dollar-neutral with names with exposure to Bitcoin driven down further, a source said.

Coinbase Global Inc.’s 0.5% convertible notes due 2026 hit their lowest level since pricing as Bitcoin plummeted more than 10% and industry peer Celsius Network halted withdrawals from its platform.

Travel names remained under pressure with NCL Corp. Ltd.’s 1.125% notes due 2027 exchangeable for Norwegian Cruise Line Holdings Ltd.’s shares contracting another 2 points dollar-neutral after a 2 point dollar-neutral contraction last Friday.

Illumina Inc.’s 0% convertible notes due Aug. 18, 2023 (BBB) saw the heaviest volume of the session with the investment grade-rated notes becoming an attractive yield play.

Coinbase tanks

Coinbase’s 0.5% convertible notes due 2026 tanked on Monday with the notes hitting their lowest outright level since the $1.25 billion issue priced at 99 in May 2021.

The 0.5% convertible notes fell 7 points outright.

They were changing hands at 60 in the late afternoon with a yield just shy of 14%.

There was $11 million in reported volume.

Convertible notes with exposure to Bitcoin were driven down about 3 points dollar-neutral on Monday, a source said.

Coinbase’s stock tanked as Bitcoin crumbled and crypto lender Celsius Network collapsed.

Coinbase’s stock traded to a low of $46 and a high of $54.30 before closing the day at $52.01, a decrease of 11.41%.

Bitcoin was changing hands at $23,171.20, a decrease of 12.74%, shortly after the close of U.S. equity markets.

The crypto meltdown accelerated on Monday after crypto lending platform Celsius Network failed and halted withdrawals from its platform.

Bitcoin had been bordering the $30,000 threshold until Friday’s CPI report.

Selling in the cryptocurrency accelerated following Celsius’ Sunday announcement with Bitcoin crashing below its $24,000 support level during Monday’s session.

Travel names pressured

Travel names remained under pressure on Monday with Norwegian’s 1.125% exchangeable notes due 2027 seeing another large dollar-neutral contraction.

The 1.125% notes were down 2.625 points outright with stock off more than 12%.

They were changing hands at 68.125 versus a stock price of $11.66 in the late afternoon.

The notes were contracted 2 points dollar-neutral, a source said.

There was $9 million in reported volume.

Norwegian’s stock traded to a low of $11.45 and a high of $12.47 before closing the day at $11.55, a decrease of 12.30%.

The notes also contracted 2 points on Friday, a source said.

Illumina in focus

Illumina’s 0% convertible notes due Aug. 18, 2023 were in focus on Monday with the notes falling further below par.

The 0% notes shaved off another 0.375 point outright.

They were changing hands at 94.75 in the late afternoon for a yield of 4.676%.

With a conversion premium of more than 130%, the notes have little to no call optionality.

However, the notes, which have historically traded rich, were looking more attractive as a yield play the further they drop below par, a source said.

The notes carry an investment-grade rating and were trading with a more than 150 bps premium to the 1-year Treasury bill, which settled Monday with a yield of 2.945%.

Mentioned in this article:

Coinbase Global Inc. Nasdaq: COIN

Illumina Inc. Nasdaq: ILMN

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

© 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.