Are investment grade convertibles on the rise?

After declining for a decade, these issues have been popular in 2019. What could this mean for the asset class?

Time to read: 3 min

Since the beginning of 2019, we’ve seen robust new issuance in the US convertible market. Year to date, total proceeds are above the $11 billion mark1, roughly equivalent to the same period in 2018, a year that ended with approximately $51 billion2 of new paper, setting a decade-high mark. Equally as important for our market is the significant representation of investment grade-rated converts this year. Almost $5 billion, or nearly half of dollars raised by convertible bonds and preferred offerings this year, are rated investment grade.3

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Do convertible securities have a role to play in 2019?

Our team believes the answer is yes. Here’s why.

Time to read: 4 min

Last week, a well-known, large US-based asset management firm decided to close its convertible securities fund, citing the fund’s inability to “gain broad acceptance” among some investors and, as part of a review of its products and offerings, “eliminating funds that lack a distinct role.” Following this announcement, the Invesco Convertible Securities Team has fielded several questions about our view of convertible securities. We continue to believe that convertible market remains healthy and that converts may offer investors a way to participate in the upside of the issuer’s stock while providing the potential downside risk mitigation of a fixed income instrument through regular coupons, a stated par value and maturity date.

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Convertible securities: What does the speedy pace of issuance mean for investors?

New issues mean new opportunities

Time to read: 2 min

May was the busiest month for convertible security issuance in the US market in almost four years — 21 new deals were completed, generating nearly $9 billion in proceeds for issuing companies.1 While the recent torrent of new issues could put some pressure on valuations in the convertibles market, the Invesco Convertible Securities Team believes this pickup in issuance is a healthy development for the asset class overall, as it gives active managers such as ourselves the ability to pursue new investment opportunities.

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Three reasons to consider convertibles now

Equity volatility, the prospect of rising interest rates and an uptick in issuance may bode well for the asset class

Time to read: 3 min

After trailing US stocks in 2017,1 US convertible securities outperformed during the volatile first quarter of 2018. Given the prospect of further market volatility, the expectation for rising interest rates and a recent pickup in convertible issuance, the Invesco Convertible Securities team has a favorable outlook for this asset class in the near to medium term.

Convertibles may withstand equity volatility

A convertible security is a corporate bond that has the added feature of being converted into a fixed number of shares of common stock. Therefore, convertibles have the ability to

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