Morning Commentary: Pinduoduo convertible notes active as Asian names draw interest

By Abigail W. Adams

Portland, Me., Oct. 19 – It was a relatively quiet morning in the convertibles secondary space as equity markets struggled to find direction as it digested a slew of stronger-than-expected earnings coupled with a 10-year Treasury yield that hit a new 52-week high.

Indexes were mixed shortly before 11 a.m. ET after wavering between gains and losses following a low open.

The Dow Jones industrial average was up 28 points, or 0.09%, the S&P 500 index was down 0.30%, the Nasdaq Composite index was down 0.33% and the Russell 2000 index was down 1.22% shortly before 11 a.m. ET.

There was $51 million in reported volume about one hour into the session with few names seeing concentrated trading activity.

However, Pinduoduo Inc.’s 0% convertible notes due 2025 saw heavy volume early in the session with the ADR space sparking fresh interest from investors.

Pinduoduo’s 0% convertible notes were relatively unchanged in active trading.

The notes remained on a 90-handle and were changing hands at 90.625 with a yield of about 9% early in the session, a source said.

The long-busted convertible notes trade for their yield with the notes putable on Dec. 1, 2023, a source said.

While quiet early Monday, Momo Inc.’s 1.25% convertible notes due 2025 saw heavy volume on Tuesday.

Momo’s 1.25% convertible notes were also relatively unchanged with the notes on a 93-handle.

The notes become putable on July 1, 2023 and were offering a yield of almost 12%.

The notes were attractive based on their yields, assuming the companies will honor the puts, a source said.

With the recent euphoria in the market, investors may be willing to take on the risk with the convertible notes of China-based companies getting “a nibble,” a source said.

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