Morning Commentary: Ford convertible notes fall outright, hold dollar-neutral

By Abigail W. Adams

Portland, Me., Sept. 20 – It was another light volume start to the day in the convertibles secondary space on Tuesday as risk aversion swept through markets as the Federal Open Market Committee launched its two-day meeting.

Equity indexes wiped out their gains from the previous session and were firmly in the red in early trading.

The Dow Jones industrial average was down 384 points, or 1.25%, the S&P 500 index was down 1.17%, the Nasdaq Composite index was down 0.85% and the Russell 2000 index was down 1.5% shortly before 11 a.m. ET.

There was $58 million in reported trading volume about one hour into the session with Ford Motor Co. the name of the day.

Ford’s 0% convertible notes due 2026 were down outright but holding dollar-neutral as stock with the auto maker the latest blue chip company to issue a dire earnings warning.

The 0% convertible notes were off about 5 points outright with stock down more than 8%.

The notes were changing hands at 102.375 versus a stock price of $13.49 early in the session.

However, the notes were holding up well dollar-neutral with the notes unchanged to contracted about 0.125 point, a source said.

There was $6 million in reported volume.

Ford’s stock was changing hands at $13.60, a decrease of 8.94%, shortly before 11 a.m. ET.

Ford announced post-close on Monday that third-quarter earnings would fall far short of expectations due to supply chain and inflation pressures.

The company released revised guidance for operating profits of $1.4 billion to $1.7 billion due to a production delay of 40,000 to 45,000 vehicles and $1 billion in higher-than-expected costs.

Analysts had expected an operating profit of $2.9 billion.

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