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Tesla Fuels $166 Billion Bonanza in a Risky Corner of Finance

  • Electric-carmaker’s share surge has boosted convertible bonds
  • Back-to-work bets have added to allure of hybrid securities

Tesla Inc.’s entry to the S&P 500 may be stoking relentless controversy, but in a specialized market for risk assets the electric-car maker is eliciting cheers all round.

Fueled by the Tesla effect, convertible bonds -- which start life as low-interest debt but can turn into shares if stock prices get high enough -- are poised for one of their best-ever years.