Morning Commentary: Rivian convertible notes shoot to new heights in early trading

By Abigail W. Adams

Portland, Me., July 7 – It was a quiet yet firm start to the session on Friday as the heavy selling of the previous day ceased following the U.S. nonfarm payrolls report, which reflected some softening in the labor market.

Equity indexes were mixed and Treasury yields slightly lower with U.S. job gains coming in below expectations while wage growth remained strong in the payrolls report.

The report follows the blockbuster ADP employment report that blew past expectations for job gains and sparked heavy selling on Thursday.

The Dow Jones industrial average was down 36 points, or 0.10%, the S&P 500 index was up 0.01%, the Nasdaq Composite index was up 0.16% and the Russell 2000 index was up 1.19% shortly before 11 a.m. ET.

While markets were firmly focused on macro data, topical news was the driver of trading activity early Friday.

There was $47 million in reported convertibles trading volume about one hour into the session with Rivian Automotive Inc.’s 4.625% convertible notes due 2029 accounting for nearly one-third of the total activity in the space.

Rivian’s 4.625% notes continued to shoot to new outright heights as the stock’s upward momentum continued.

The notes were changing hands at 142.375 versus a stock price of $23.72 early in the session, according to a market source.

There was $16 million in reported volume.

Rivian’s stock traded up to $23.81, an increase of 10.13%, shortly before 11 a.m. ET.

Stock continued to rocket higher on Friday with a bullish analyst call further fueling the stock’s upward momentum.

Rivian’s stock has gained almost 50% over the past week after the company’s deliveries blew past expectations.

The 4.625% convertible notes have gained more than 45 points outright since the last week of June.

While the notes have expanded on the move up, the theoretical delta is 90%, which limited the dollar-neutral move, a source said.

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