Morning Commentary: Convertibles quiet pre-Fed; Upwork active on repurchase announcement

By Abigail W. Adams

Portland, Me., March 22 – It was a quiet morning in the convertibles secondary space with equities and Treasuries either side of unchanged as market players await the Federal Open Market Committee’s afternoon announcement.

The already high-volatility event has increased significance following the dramatic repricing in financial markets since Silicon Valley Bank’s collapse.

The market will be laser focused on the afternoon announcement to determine the Fed’s path forward in fighting inflation while addressing a banking crisis that was largely sparked by the losses SVB incurred due to rising rates.

The market has already priced in a potential rate decision ranging from no change in rates to a possible 25 basis point increase, and the market reaction may be muted if the Fed falls in line with expectations, a source said.

However, if the Fed delivers anything outside of that range, the market response could be explosive.

Equity indexes wavered between gains and losses early in the session with the Dow Jones industrial average up 7 points, or 0.02%, the S&P 500 index up 0.13%, the Nasdaq Composite index up 0.16% and the Russell 2000 index down 0.21% shortly before 11 a.m. ET.

There was $76 million in reported volume about one hour into the session with few names seeing concentrated trading activity.

Upwork Inc.’s 0.25% convertible notes due 2026 were active after the company announced it was repurchasing a portion of the outstanding amount.

Upwork announced that it would repurchase $196.8 million in principal of the 0.25% notes for an estimated amount of $157 million in privately negotiated transactions, according to a company press release.

The repurchase price will be based on the average daily VWAP over a two-day trading period beginning on Wednesday.

The 0.25% notes saw several round-lot prints in the 77 to 77.125 range early in the session and some small odd-lot trades in the low 80s, a source said.

Upwork’s stock was changing hands at $10.80, an increase of 1.27%, shortly before 11 a.m. ET.

Hedge funds account for two of the top three holders of Upwork’s convertible notes, a source said.

However, the top 10 holders are a more balanced mix of hedge and outright accounts.

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