Morning Commentary: DISH short-duration convertible notes edge higher in early trading

By Abigail W. Adams

Portland, Me., Nov. 17 – While the convertibles primary market was dormant throughout the week, a surprise to many, the secondary space remained active amid improved market conditions.

While equity markets have pulled back since the post-CPI surge on Tuesday with indexes mixed early Friday, they stand poised to close the week with strong gains.

The Dow Jones industrial average was down 16 points, or 0.05%, the S&P 500 index was down 0.01%, the Nasdaq Composite index was down 0.11% and the Russell 2000 index was up 1.19% shortly before 11 a.m. ET.

There was $77 million in reported convertible bond trading volume about one hour into the session with buyers continuing to lift some badly beaten issues.

DISH Network Corp.’s soon-to-mature 2.375% convertible notes due March 15, 2024 (Caa2/CCC-) continued to edge higher in active trade with the notes making a dramatic recovery over the past week.

The 2.375% notes were trading in the 95.125 to 95.375 context in early trade, a source said.

The yield narrowed to about 18%.

There was $6 million in reported volume.

The notes are not equity sensitive and have long traded based on market expectations about their redemption upon maturity.

The notes saw heavy selling pressure the previous week after DISH’s large earnings miss raised doubts.

The notes sank to a 92-handle with the yield jumping above 25%, which some sources felt was a high trading level given the company’s fundamentals.

However, the notes have seen a large rebound over the past week as risk-on sentiment returned and buyers flooded the market.

The notes were lifted to a 95-handle the previous session as the market expressed increased confidence about the company’s ability to cover the quickly maturing debt.

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