Morning Commentary: Duke Energy convertible notes add in heavy volume

By Abigail W. Adams

Portland, Me., April 5 – The convertible primary market remained dormant early Wednesday with the prospects for new issuance during the holiday-shortened week coming to a close.

However, the primary market still logged the fourth biggest week for new deal activity in 2023 with Duke Energy Corp.’s $1.5 billion offering of 4.125% convertible notes due 2026 (Baa2/BBB).

The 4.125% convertible notes were still dominating activity in the secondary space with the notes continuing to add on a mixed day for equities and continued strength in Treasuries.

The Dow Jones industrial average was up 28 points, or 0.08%, the S&P 500 index was down 0.50%, the Nasdaq Composite index was down 1.27% and the Russell 2000 index was down 1% shortly before 11 a.m. ET.

There was $161 million in reported volume about one hour into the session with Duke’s 4.125% convertible notes accounting for more than $100 million of the activity in the space.

The notes rose 0.625 points outright in early trade.

They were changing hands at 101.125 versus a stock price of $97.38 early in the session.

Duke Energy stock was trading at $98.19, an increase of 2.04%, shortly before 11 a.m. ET.

The notes were looking increasingly attractive as Treasury yields continued to fall with the three-year yield at 3.477% shortly before 11 a.m. ET.

“If you’re going to clip coupons, it might as well be Duke’s,” a source said.

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