Morning Commentary: Convertibles secondary quiet early; Rivian hits new outright high

By Abigail W. Adams

Portland, Me., Oct. 17 – The convertibles primary market remained dormant and the secondary quiet on Tuesday with markets mixed as earnings results come in and macro data continues to surprise markets.

Bond yields jumped following the latest retail sales figures which reflected a 0.7% increase in consumer spending versus the 0.3% expected.

The strength of the consumers continued to surprise the market and support bets for a hawkish fed.

It also helped alleviate some recession concerns which have resurfaced in recent weeks.

Equity indexes were mixed on the data with the small cap index outperforming.

The Dow Jones industrial average was down 46 points, or 0.14%, the S&P 500 index was down 0.23%, the Nasdaq Composite index was down 0.41% and the Russell 2000 index was up 0.95% shortly before 11 a.m. ET.

The 10-year Treasury yield was up 13 basis points to 4.838% with yields once again approaching multi-decade highs.

There was $54 million in reported volume about one hour into the session with high-grade names dominating the tape.

The notes improved amid the move in Treasuries.

Duke Energy Corp.’s 4.125% convertible notes due 2026 (Baa2/BBB) was the top traded high-grade issue early in the session.

The 4.125% notes were largely unchanged outright and were changing hands at 97.5 versus a stock price of $89.56 early in the session.

The yield was about 5.125%.

There was 5.5 million in reported volume.

Duke Energy’s stock was trading at $88.93, a decrease of 0.57%, shortly before 11 a.m. ET.

Rivian Automotive Inc.’s convertible notes were also posting gains albeit in light trade early in the session.

Rivian’s recently priced 3.625% convertible notes due 2030 hit their highest outright level since pricing and strengthened on hedge.

The notes gained 2.5% points outright with stock up a little more than 1%.

They were trading at 106.25 versus a stock price of $19.73 early in the session, according to a market source.

There was $2 million in reported volume.

Rivian’s 4.625% convertible notes due 2029 gained 1.5 points outright.

The notes were trading just shy of 123 versus a stock price of $19.73.

There was also $2 million in reported volume.

Rivian’s stock was trading at $20, an increase of 1.73%, shortly before 11 a.m. ET.

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