Morning Commentary: American Airlines convertible notes in focus, rise on hiked guidance

By Abigail W. Adams

Portland, Me., Jan. 12 – The convertibles secondary space saw a quiet start to Thursday’s session as markets digested the latest U.S. Consumer Price Index report and jobless claims numbers.

While equity markets swung between gains and losses early in the session, the market response was muted in comparison to the wild price reactions to previous CPI reports with December’s inflationary numbers falling in line with expectations.

After dipping into negative territory at the open, equity indexes recouped their losses and turned positive although the tech heavy Nasdaq was again dragged into the red shortly before 11 a.m. ET.

The Dow Jones industrial average up 131 points, or 0.39%, the S&P 500 index was up 0.11%, the Nasdaq Composite index was down 0.09% and the Russell 2000 index was up 0.71%.

With the highly anticipated CPI report released, the market’s attention will shift to earnings with the season set to launch on Friday.

Early earnings releases have already been drivers of trading activity in the secondary space with Thursday no exception.

American Airlines Group Inc.’s 6.5% convertible notes due 2025 dominated activity in the secondary space with the notes rising alongside stock after the airline upped its forward guidance.

The 6.5% convertible notes climbed 4.5 points outright with stock up about 5%.

The notes were changing hands at 122.25 versus a stock price of $16.07 early in the session.

There was $14 million in reported volume.

American Airlines’ stock was trading at $16.02, an increase of 4.47%, shortly before 11 a.m. ET.

Stock climbed after the company raised its projected fourth-quarter revenue growth to 16% to 17% from the previous 11% to 13% and raised its projected earnings per share to $1.12 to $1.17 from the previous estimate of 50 cents to 70 cents.

American Airlines is scheduled to release earnings on Jan. 18.

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