Morning Commentary: Convertibles activity muted; Cleveland-Cliffs active post-earnings

By Abigail W. Adams

Portland, Me., Oct. 19 – Trading activity in the convertibles secondary space was muted on Friday with highly liquid equity-sensitive notes at the top of volume charts.

Cleveland-Cliffs Inc.’s 1.5% convertible notes due 2025 were active in the secondary space after the mining company announced third-quarter earnings prior to the market open.

The convertible notes were largely moving in line with stock, which dropped more than $1, or 5%, early in the session but pared its losses as the session progressed.

The 1.5% notes dropped more than 10 points outright to trade at 143 early in the session.

Cleveland-Cliffs reported a slight earnings miss in the third quarter with earnings per share from continued operations of 64 cents. Analysts had been expecting earnings per share of 67 cents.

With attention turning toward earnings and equity sensitive convertible notes, Evolent Health, Inc.’s new 1.5% convertible notes due 2025 were not seen trading early Friday.

The notes dominated activity during Thursday’s session and were expanded at least 1 point on a dollar-neutral, or hedged, basis. “I guess everything that needed to get done got done,” a market source said.

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