Morning Commentary: Convertibles better on sentiment; SanDisk 1.5% notes up on outright buying

By Rebecca Melvin

New York, Sept. 3 – U.S. convertibles improved early Thursday amid better buyers even as the countdown to the holiday weekend was in full gear and slowing trading volume was anticipated.

“It’s a lift-a-thon. Sentiment has turned and everything across the board is better by 0.25 point to 0.5 point,” a New York-based trader said.

A notably improved issue was SanDisk Corp.’s 1.5% convertibles due 2017, the trader said.

The bonds of the Milpitas, Calif.-based flash memory chip maker were trading actively between 126.90 and 127.00, which was up from about 124.50 on Wednesday, according to Trace data.

The bond is being added to the convertibles index, and there were outright buyers of the issue, the trader said.

SanDisk shares were also higher, changing hands up about 2% at $55.15, but the bonds still expanded on a dollar-neutral, or hedged, basis by 0.5 point to 0.75 point, outperforming most of the rest of the convertibles market.

“There isn’t any real reason [for Thursday’s improvement] other than sentiment,” the trader said, adding that the improvement was concentrated on Thursday’s session and hadn’t improved much on Wednesday despite the fact that equities were trading up on Wednesday as well as on Thursday.

Other names such as Intel Corp. and Priceline Group Inc. were better by 0.25 point to 0.5 point.

UTi Worldwide Inc.’s 4.5% convertibles due 2019 were last around 87 but were not seen to have traded on Thursday ahead of quarterly results to be reported by the Virgin Islands-based ocean freight and logistics company after the close.

UTi Worldwide shares were down 12 cents, or 1.8%, at $6.69 at late morning.

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