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Morning Commentary: Southwest Airlines convertibles active; Royal Caribbean off outright
By Abigail W. Adams
Portland, Me., Sept. 30 – The convertibles secondary space stood poised for a quiet end to another brutal quarter with accounts closing their books at the low point of the year.
Equity markets were in the green in early trading on Friday. However, it will do little to pare year-to-date losses that exceed 20% for outright accounts and 11% for hedge players, sources said.
The Dow Jones industrial average was up 23 points, or 0.09%, the S&P 500 index was up 0.43%, the Nasdaq Composite index was up 0.91% and the Russell 2000 index was up 1.44%.
Convertibles trading activity in the secondary space was relatively light with few names seeing concentrated activity and little price movement in the names that did trade.
Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) continued to dominate the tape although with little change to price.
The 1.25% convertible notes were slightly weaker outright with stock off early in the session.
The notes were changing hands at 115 in heavy volume; they were unchanged dollar-neutral.
Southwest’s stock was trading at $31.34, a decrease of 1.01%.
Royal Caribbean Group’s 6% convertible notes due 2025 saw the largest price movement although volume in the name was light.
The notes fell outright but improved dollar-neutral as stock got clocked following disappointing earnings results from Carnival Corp.
The 6% convertible notes were down 7 points outright with stock off more than 8%.
The notes were changing hands at 107.5 early in the session.
Royal Caribbean’s stock was trading at $39.99, a decrease of 8.38%, shortly before 11 a.m. ET.
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