Illumina in focus as maturity approaches; ZTO Express gains on earnings; Fisker rises

By Abigail W. Adams

Portland, Me., May 18 – It was a quiet day in the convertibles secondary space on Thursday with activity surrounding recent issues continuing to diminish.

While market players were hopeful for an active week of new issuance, the convertibles primary market was largely quiet as the investment-grade primary market logged its busiest week of the year and the high-yield bond market saw a steady stream of dealmaking.

Equity indexes wavered between gains and losses on Thursday after the strong gains of the previous session, which reflected optimism about a resolution to debt ceiling negotiations.

While there were signs of indecision in intraday activity, equity indexes were lifted into the close with all ending in positive territory and at the highs of the day.

The Dow Jones industrial average closed Thursday up 115 points, or 0.34%, the S&P 500 index closed up 0.94%, the Nasdaq Composite index closed up 1.51% and the Russell 2000 index closed up 0.58%.

There was $53 million in reported convertible bond trading volume about one hour into the session and $370 million on the tape about one hour before the market close with few names seeing concentrated trading activity.

Illumina Inc.’s soon-to-mature 0% convertible notes due Aug. 18, 2023 (BBB) were the top traded issue in the space as their end of life approaches.

Earnings-related news continued to spark price movements in outstanding issues with ZTO Express’ 1.5% convertible notes due 2027 rising on an outright and dollar-neutral basis.

Trading of Veeco Instruments Inc.’s new 2.875% convertible notes due 2027, the sole new deal of the week, tempered on Thursday.

However, the notes continued to add outright on a strong day for stock after making large gains on their aftermarket debut.

Fisker Inc.’s distressed 2.5% convertible notes due 2026 were on the rise in heavy volume after the EV startup announced it was exploring collaborations with other companies.

Illumina’s end-of-life

Illumina’s 0% convertible notes due Aug. 18, 2023 were the most actively traded issue in the secondary space with the notes continuing to switch hands as their maturity approaches.

The 0% notes continued to trade on a 98-handle.

They were seen changing hands at 98.625 with a yield of about 7% in the late afternoon.

There was $15 million in reported volume.

The notes will be redeemed at par upon maturity.

ZTO’s earnings

ZTO’s 1.5% convertible notes due 2027 made strong outright and dollar-neutral gains on Thursday with the company’s equity lifted post-earnings.

The notes rose 3.5 points outright with stock up about 4% in intraday activity.

The convertibles were trading at 110.25 early in the session, according to a market source.

They came in alongside stock as the session progressed with the notes trading at 109.375 in the late afternoon.

They expanded on the move up.

There was $12 million in reported volume.

ZTO’s American Depositary Shares to a low of $28.92 and a high of $30.05 before closing at $29.04, an increase of 2%.

The Shanghai-based express delivery company reported earnings of $2.33 versus analyst expectations for earnings of $1.78.

Revenue was $8.98 billion versus analyst expectations for earnings of $9.27 billion.

Veeco Day 2

While activity in the name tempered their second day in the secondary space, Veeco’s new 2.875% convertible notes due 2027 continued to add after a strong aftermarket debut.

The 2.875% notes gained about 1.25 points outright with stock up 3%.

The convertibles were seen at 103.875 in the late afternoon, according to a market source.

There was $7 million in reported volume.

Veeco’s stock traded to a low of $21.83 and a high of $22.94 before closing at $22.90, up 3.53%.

Veeco’s $205 million offering of six-year convertible notes was the sole deal of the week.

The overnight deal was well oversubscribed and made large gains on its aftermarket debut on Wednesday.

While the notes closed the day on a 102-handle, they expanded 3 to 3.5 points dollar-neutral.

Fisker rises

Fisker’s distressed 2.5% convertible notes due 2026 were lifted in heavy volume on Thursday after the company announced it was exploring collaborations with other companies.

The 2.5% notes rose 1.5 points outright.

They were changing hands at 41.75 in the late afternoon.

The yield was about 32.5%.

There was $10 million in reported volume.

While not equity sensitive, Fisker’s stock traded to a low of $6.19 and a high of $6.45 before closing at $6.25, a decrease of 2.19%.

The EV startup’s convertible notes were attracting buyers after it announced it was exploring collaborations to help it scale up.

Mentioned in this article:

Fisker Inc. NYSE: FSR

Illumina Inc. Nasdaq: ILMN

Veeco Instruments Inc. Nasdaq: VECO

ZTO Express NYSE: ZTO

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