The hot sales of micro-strategy zero-coupon convertible bonds have driven the issuance of convertible bonds in the United States to a record high

According to data compiled by Bloomberg, the issuance of convertible bonds by US companies this year has reached $81 billion (as of 12/16), a 46% increase from 2023, the third highest in more than a decade. Richard Duffield, head of Capital Market at Citigroup, said that the issuance in 2025 may range from $70 billion to $90 billion, potentially challenging the peak during the pandemic, as interest rates remain higher than many on Wall Street expect, and there are no signs that encryption asset-related strategies will disappear quickly.

MicroStrategy leads the encryption industry issuance of convertible bonds in the capital market

Encryption currency trading has been the main driver of convertible bonds in 2024. MicroStrategy raised $6.2 billion through convertible bonds this year, incentivizing several other companies to follow its strategy of buying bitcoin with its issuance convertible bonds.

(Micro strategy issuance convertible bonds, low interest rate, high stock price conversion price, what is the principle of operation?) )

Micro Strategy's recent issuance convertible bonds not only do not offer a distribution interest (coupon rate is zero), but the conversion price is as high as 55% over the current share price, indicating the enthusiasm of its trading. A number of financial institutions in Taiwan, including Cathay, Fubon, China Trust and Yuanta Securities, have bought its convertible bonds.

(Taiwan financial institutions are also crazy about convertible bonds, Cathay, Fubon, and Yuanta are all participating)

MicroStrategy unveiled its "21/21 Plan" at the end of October, which aims to add $42 billion in capital over the next three years, including $21 billion in equity and $21 billion in fixed-income securities, which will further support its acquisition of Bitcoin as part of its reserve asset strategy. At an average annual volume of $7 billion in convertible bonds, it represents 7.8% of the nation's annual issuance (estimated at $90 billion).

(Understanding MicroStrategy from Scratch: The Transformation Journey from Business Intelligence (BI) to the Bitcoin Empire)

Increased volatility, attracting hedge fund arbitrage

Citibank's Duffield said the better terms were driven by increased volatility in the stock market and the simple fact that most benchmark indices are at or near all-time highs.

Convertible bonds tend to attract hedge funds that focus on arbitrage. Hedge funds buy convertible bonds and short stocks as a bet on the volatility of the underlying stock. The more volatile the stock, the more profitable the trade will be.

In the past two months, volatility has risen again, and the zero-coupon convertible bonds seen by encryption currency companies are the result of high volatility in the industry.

However, it also means that if bitcoin pulls back from the record run, volatility can only lead to the sale of additional convertible bonds so far.

The article 'MicroStrategy's zero-coupon convertible bond is hot, driving the issuance of US convertible bonds to a high' first appeared on ChainNews ABMedia.