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US Convertible Bonds Hit $10 Billion in Weekly Deals, Echoing Pandemic-Era Boom

by Team Lumida
June 19, 2025
in Crypto
Reading Time: 4 mins read
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Bitcoin Mining Stocks Outperform BTC in Early 2025, Network Strength Grows

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Key Takeaways:

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  • Nearly $10 billion was raised across 10 convertible bond deals last week, marking the busiest week since March 2021.
  • Companies like Rubrik, Cloudflare, GameStop, and Oddity Tech priced bonds with zero coupons and high conversion premiums, taking advantage of surging demand.
  • Hedge funds are driving demand through convertible arbitrage strategies, while investors seek new opportunities as older bonds mature.
  • The favorable terms, including call spread overlays and low costs, are reminiscent of the pandemic-era market, despite higher interest rates today.

What Happened?

The U.S. convertible bond market had its strongest week in over four years, with $10 billion raised across 10 deals. This surge, driven by strong investor demand, has pushed 2025’s issuance volume ahead of last year’s pace.

Notable deals included Rubrik’s $1.15 billion and Cloudflare’s $2 billion offerings, both priced with zero coupons and conversion premiums exceeding 40%. These deals also featured call spread overlays, a derivative structure that raises conversion thresholds to over 100% above current share prices.

Hedge funds have been a key driver of demand, employing convertible arbitrage strategies that profit from volatility by buying bonds and shorting the underlying stock. This strategy has gained traction in high-growth tech names with significant price swings.

The surge in issuance is also fueled by the maturity of low- or no-coupon bonds issued during the pandemic. About$65 billion worth of these bonds will come due by the end of 2026, prompting investors to seek new opportunities to reinvest capital.


Why It Matters?

The booming convertible bond market highlights a rare opportunity for companies to raise capital at favorable terms, even in a higher interest rate environment. The ability to issue zero-coupon bonds with high conversion premiums reflects strong investor appetite and a supply-demand imbalance, with too much capital chasing too few deals.

For investors, the market offers exposure to high-growth companies with built-in downside protection, making it an attractive option amid market volatility. However, concerns are emerging that investors may be overpaying for volatility, raising questions about the sustainability of current valuations.

The resurgence of convertible bonds also underscores the broader trend of companies leveraging innovative financing structures to navigate economic uncertainty and capitalize on investor demand.


What’s Next?

While the current pace of deals may slow due to geopolitical risks and the summer earnings blackout period, the market is expected to remain active as more Covid-era bonds mature. Bankers anticipate continued opportunistic issuance, particularly from high-growth tech companies seeking to lock in favorable terms.

Investors will closely monitor market dynamics, including volatility trends and the balance between supply and demand, to assess whether the current boom can be sustained. The convertible bond market’s performance will also serve as a barometer for broader investor sentiment in a volatile economic environment.

Source
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018