Global Convertibles: Narrow markets prompt big swings

Research evidence excerpt

Global Convertibles: Narrow markets prompt big swings

Accessible version

Global Convertibles

Narrow markets prompt big swings

CBs are on top, but the market’s breadth is fairly narrow 21 May 2026

Convertible bonds have been on a historic run in 2026. In addition to robust issuance and Convertibles Strategy

demand, relative performance versus other assets (both stocks and bonds) has been Global

particularly strong. However, CBs’ sizable index-level gains (now +13.9% globally year- Michael Youngworth, CFA

to-date) have been narrowly-driven. Indeed, although 60% of issuers have realized a CBs, Pfds & Derivs Strategist

positive return, just 4 account for the bulk of the rally (WDC, LITE, HYUELE, and NBIS). BofAS+1 646 855 6493

michael.youngworth@bofa.com

Concentration is among the AI theme, not one single name

Along these lines, we’ve found that the CB space is now historically concentrated in just

We include a list of abbreviations ata handful of names. Globally, the largest 10 issuers by market value now account for

the end of this report.almost 18% of the benchmark’s weight, a near record high. Although we’ve seen other

periods of high concentration in the past, today’s expression is unique in the sense that

it is especially “thematic” rather than single-name-driven. For example, in mid-2020 the

market was comparably concentrated, though then it was defined solely by Tesla (TSLA),

which comprised 7% of the market on its own. In contrast, the concentration today is

clustered around 5-10 names linked to the rapidly growing AI-trade, including Western

Digital (WDC), Lumentum (LITE), Alibaba (BABA), Nebius (NBIS), and CoreWeave (CRWV).

Narrow markets are prone to swings, promoting gamma

On a forward 3m basis, we’ve found that both global and US CB market performance has