Morning Commentary: Convertible bond trading subdued, but travel names still in play

Chicago, July 19 – Travel names continued to be in play in the secondary convertible bond market on Tuesday on a generally subdued morning, as noted by a market source.

The background was positive, though, with equity indices higher for the second day in a row as the market attempts to read the tea leaves on the first few earnings releases as the season got underway in earnest late last week.

Southwest Airlines up

Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) continued to trade higher, steadily working their way back from a two-year low.

The bonds had fallen to 117 in mid-June, but on Tuesday they were again trading above 128.

This puts their trading level near where it was at during low points in March and May but nowhere near the stratospheric heights of 176 in April 2021.

The company’s LUV stock is up 16.59% over the past month.

Tuesday morning it was 3.1% better at midday.

Booking Holdings rises

In the early going on Tuesday, Booking Holdings Inc. was still working on a recovery.

Morning trades lifted the convertible bonds 2.5 to 3 points higher than where they ended the day on Monday.

The travel technology company’s bonds were up above 127, reaching for 128, reflecting a slow and steady incline after a precipitous decline in June.

Booking’s stock was up 4.39% mid-morning, at $1,815.12.

Stock has risen 7.24% for the travel fare aggregator over the past week.

Carnival eyed

Cruise line stocks were lifted on Monday by the U.S. Centers for Disease Control and Prevention announcing the end of its voluntary Covid-19 program.

The news failed to do anything to Carnival Corp.’s 5.75% convertible bonds due 2023 on Monday.

One smaller trade made it onto the tape on Thursday with the notes an entire 10 points higher than where they ended on Friday.

The notes were above 123 versus Friday’s consent trading just above 113.

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