Structured Notes - Bloomberg Briefs

BRIEF
Structured
Notes
InDONESIA CLN
SALES RISE TO
5-MONTH HIGH. The
higher returns are
luring investors amid a stock slump and
currency depreciation. Page 2.
Structured
Notes Watch
surge in U.K. HOUSE PRICES REVIVES PROPERTY NOTES. Castle Trust
and Banco Santander are selling or preparing to issue products linked to home
prices. Page 3.
HSH Nordbank to sell its biggest note in more than a year.
The $69 million of callable step-up
securities mature in seven years, with a
maximum yield of 3 percent. Page 4.
INTERVIEW. Jim Maher of Archford
Capital sees an opportunity in selling
market-linked CDs to companies managing employee stock plans. Page 5.
buyer’s corner. Credit-default swap
levels for global issuers were mostly little
changed from last week. Page 6.
04.24.14
www.bloombergbriefs.com
Coffee-Tied ETN’s 95% Return Beats All Others
By Regina Tan
The 95 percent return on a coffee-linked note this year is outstripping gains on all other
exchange-traded products without leverage globally, as drought boosted prices of the crop.
The security, sold by Barclays Plc and tied to futures contracts for the bean, rose to
$42.22 as of April 23, from $21.70 at the end of 2013, according to data compiled by
Bloomberg. A second Barclays-issued note linked to coffee returned 86 percent, surpassing the average 1.9 percent on 947 exchange-traded products worldwide for which
Bloomberg-data show year-to-date returns.
Dry spells in Brazil, the world’s biggest producer of coffee, may drive up prices as damage inflicted this year interferes with 2015 production, according to Sterling Smith, a
futures specialist at Citigroup Inc.
“We’re going to have a protracted bull market in coffee,” Chicago-based Smith said.
Investors may favor structured notes to bet on the bean given “you can dial down the size
and volatility much easier than with futures contracts,” he said.
Only the BULL VWS X2H, an exchange-traded product which uses leverage to increase
returns and is based on the shares of Vestas Wind Systems A/S, a Danish wind-turbine
maker, surpassed the coffee-linked ETNs. The Copenhagen-listed security returned 97
percent this year, the data show.
The top-performing Barclays’ exchange-traded note is tied to the Dow Jones-UBS
Coffee Total Return Sub-Index. The other structured product issued by Barclays,
based on the bank’s Coffee Pure Beta Total Return Index, increased to $27.27 as of
April 23, the data show.
Both the securities trade on the New York Stock Exchange Arca, a platform for the
exchanged-traded notes in the U.S.
continued on next page
Volumes
Commodity ETNs Have Highest Year-to-Date Returns in U.S.
U.S. Structured
Notes Volumes*
Last Week
(April 14-18)
Year To Date
YTD Equity
YTD Rates
YTD Commodities
as of
april 18
1 year ago
$250.4 mln
$527.7 mln ⬇
$11.4 bln
$10.6 bln
$1.6 bln
$525 mln
$12.2 bln
$8.24 bln
$1.86 bln
$535.2 mln
Global rate
linked notes**
Last Week
(April 14-18)
Year To Date
YTD Int. Rate Linked
YTD Credit Linked
YTD Inflation Linked
as of
april 18
1 year ago
$619 mln
$827 mln
⬇
$21.7 bln
$7.84 bln
$11 bln
$76 mln
$27 bln
$8.59 bln
$15.5 bln
$881 mln
⬇
⬇
⬆
⬇
⬇
JO (Barclays)
CAFE (Barclays)
⬇
⬇
BOS (Deutsche)
* Based on data compiled by Bloomberg from SEC filings.
** Based on data submitted to Bloomberg by banks.
Includes Eurobond issues from all nations. Excludes
variable-principal redemption, reverse convertibles,
SEC-registered securities.
45.9
Commodity Basket
Agriculture
UGAZ (Credit Suisse)
32.2
Nickel
Commod. Basket
0
44.1
37.0
Gas
JJN (Barclays)
Source: Bloomberg LP
52.0
Base Metals
AGF (Deutsche)
DPU (Deutsche)
85.7
Coffee
DDP (Deutsche)
⬇
94.6
Coffee
20
31.9
40
Gain in Percent
1 2 3 4 5 6 7 8 9 Highest year-to-date
returns for U.S. ETNs, by
ticker and issuer.
Underlying is on bar. Red
indicates short bet,
while green is long.
60
80
100
04.24.14 www.bloombergbriefs.com
Bloomberg Brief | Structured Notes
2
News
Indonesia CLN Sales Jump to Highest in Five Months
By Regina Tan
Sales of credit-linked notes tied to Indonesia’s treasury bonds rose to the highest in five
months as returns draw investors amid a stock slump and currency depreciation.
Issuance in April climbed to 1.33 trillion rupiah ($115 million), more than four times March’s
total, according to data compiled by Bloomberg, as Moody’s Investors Service warned of
a “market sell-off” that shows the government’s heavy reliance on external funding.
“The reason why investors are still attracted to Indonesia credit is on account of higher
yields as well as expectations of improvement in the fundamentals of the economy,”
Raghavan Rajagopalan, the global head of structuring in Singapore at Standard Chartered Plc, said in an e-mail on April 22.
The yield on Indonesia’s 10-year notes increased 10 basis points, or 0.1 percentage
point, to 8.09 percent as of yesterday, the highest level since March 27, according to the
Inter Dealer Market Association. The securities yielded 8.08 percent as of 10 a.m. in
Jakarta. The economy grew 5.78 percent last year, the slowest pace since 2009.
The Jakarta Stock Exchange Composite Index fell 3.2 percent and the rupiah depreciated against the dollar the day after a parliamentary vote showed the frontrunner may
have a slimmer lead than expected, possibly limiting his ability to carry out economic
policy changes.
“There was some noise last week on account of the forthcoming elections, but that is
normal in most large economies,” Rajagopalan said. London-based Standard Chartered
issued 1.23 trillion rupiah of the credit-linked notes this month, the data show.
The bank, which makes three-quarters of its profit in Asia, this month sold 755 billion
rupiah of 10-year credit-linked notes with a coupon of 8.375 percent, according to data
compiled by Bloomberg.
“Volatility in and of itself doesn’t cause a deterioration in Indonesia’s credit fundamentals,” Christian de Guzman, a sovereign analyst at Moody’s in Singapore, said. “Indonesia’s credit metrics stack up favorably against other similarly rated countries,” such as
India and Turkey, in areas such as growth and level of debt, according to de Guzman.
Coffee-tied note ...
continued from previous page
In Asia, the securities backed by the Standard & Poor’s GSCI indices for soft commodities returned 15.2 percent year-to-date as of 1:15 p.m. Tokyo-time today, the most out of
the 23 ETNs listed on the Tokyo Stock Exchange. That compares with a drop of 1.2 percent across all securities listed on Japan’s main bourse linked to assets including crude,
gold, precious metals and equities.
Coffee futures surged about 92 percent this year as of April 23, the most among the
24 raw materials in the S&P GSCI Spot Index, amid concerns the drought in Brazil will
increase crop losses. The futures had fallen in each of the past three years.
Volatility on the futures for the beans surged to the highest since 2000 this week, according to Bloomberg-compiled data. Due to the price swings, coffee futures are “a bad
bad boy,” Citigroup’s Smith said. The fluctuations are “more than what most people can
handle,” he said.
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Most Traded U.S. Equity Linked
Issuer
BBG ID
RD6452570
43
Morgan Stanley (2)
RC3146508
29
Bank of America (3)
ZV8271342
23
Bank of America (4)
ZT3528873
21
HSBC (5)
CM0575505
17
HSBC (6)
RC6973635
16
Citigroup (7)
RD3854604
16
(1) 2.5-yr. “contingent-return optimization” notes tied to
the S&P 500 Index, maturing 9/30/2015
(2) 4-yr. “buffered leveraged” notes tied to a basket of
ETFs, maturing 8/25/2014
(3) 5-yr. “leveraged return” notes tied to the Dow Jones
Industrial Average, maturing 6/29/2018
(4) 3-yr. “autocallable step-up” notes tied to the Euro
Stoxx 50 Index, maturing 10/28/2016
(5) 2-yr. “capped leveraged” notes tied to the S& P
500, maturing 5/30/2014
(6) 10-yr. “trigger performance” notes tied to the S&P
500, maturing 7/30/2021
(7) 3-yr. “dual directional leveraged” notes tied to the
S&P 500, maturing 11/2/2015
*For the most recent 5 days as of April 21, 2014
Source: Finra’s Trace
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