We provide empirical evidence that convertible bonds integrate equity and credit markets by aligning the valuations of a firm’s stock and straight bonds. The issuance of new convertibles significantly improves cross-market integration, while the anticipated maturity of non-callable convertibles—despite carrying no new information—leads to re-segmentation. These patterns cannot be explained by changes in default risk or other observable firm characteristics. Consistent with the idea that convertibles attract investors seeking exposure to both markets, we find that convertible bond investors are more likely to simultaneously hold other securities from the same issuer. This suggests an increased presence of cross-market arbitrageurs and supports a limits-to-arbitrage explanation for the observed segmentation between credit and equity markets. Finally, with more arbitrageurs present, convertibles make bond mispricing less persistent and bond value strategies more profitable.