Morning Commentary: Nio convertible notes in focus; Illumina active in early trading

By Abigail W. Adams

Portland, Me., Feb. 17 – It was a relatively quiet morning in the convertibles secondary space as equities closed a volatile week with additional volatility.

Equity indexes again opened deep in the red.

However, small cap and value stocks outperformed with the Dow Jones industrial average and Russell 2000 index fighting off losses to flirt with positive territory as the session progressed.

The Dow was down 61 points, or 0.18%, the S&P 500 index was down 0.78%, the Nasdaq Composite index was down 1.14% and the Russell 2000 index was up 0.12% shortly before 11 a.m. ET.

There was $61 million in reported convertibles trading volume about one hour into the session; however, the top two traded issues accounted for more than one-fourth of the amount on the tape.

Nio Inc.’s 0% convertible bonds due 2026 saw heavy volume after more than one week with no round lot trades.

The 0% notes were slightly softer at 82 early in the session, a source said.

The yield for the notes, which are putable on Feb. 1, 2025, was about 11%.

There was $11 million in reported volume.

Nio’s American Depositary Shares were changing hands at $10.06, a decrease of 1.28%.

The 0.5% notes last traded on Feb. 10 with the notes in the 82.5 to 83 context, a source said.

Nio announced the previous session that it would release earnings on March 1.

The slate of China headlines, from spy balloons to missing tycoons, and Tesla’s recall may also have sparked activity in the Shanghai-based EV manufacturer, a source said.

Meanwhile, Illumina Inc.’s soon-to-mature 0% convertible notes due Aug. 18, 2023 (BBB) also saw heavy volume early in the session with short-duration notes sought after.

The 0% notes were little changed at 97.625 with the yield about 5.125%, a source said.

There was $13 million in reported volume with three large trades on the tape.

The notes have long lost their optionality and trade for their yield.

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