During the week of November 11-15, 2013 structured note issuance has been 3.5 Bn across various issuers and asset classes. Most of the issuance (340 MM) is driven by Equity Linked notes and 3.17 Bn of the issuance is driven by Interest linked products. There has been some activity in commodity linked issuance this week. For Details of the distribution refer to the chart below. Not surprisingly majority of the structured note issuance is linked to Interest rate linked by single issuer.
This week, structured notes were issued with variety of flavors and interesting themes. Majority of this issuance comprised of Interest Rate related notes Read on for more details.
You can click individual asset classes to see how the underlying issuance has happened within each asset type by underlying and Issuer.
Underlying analysis
On the Equity linked notes front there has been strong activity. Notes have been created on variety of underlyings. Index related issuance has been significant. This week issuance included notes created on the indices ( S&P 500, Stoxx 50, Russell 2000) and single names ( Pulte group, Gilead Sciences,Tesoro,Aruba, JP Morgan Proprietary index, UBS Commodity index, Pandora and so on). There has been significant activity around Apple Stock. Looks there is high appetite from institutional investors to conduct their portfolio balancing process.
Notable notes this week were tied to Apple Stock (36 MM) issued by Barclays. This note belongs to the class of leveraged and Yield Enhancement type. Barclays created a note 312070with a size of 36 MM paying Market performance leveraged at maturity date (11/28/14). On the downside this note is exposed to one to one downside underlying performance beyond the Initial level. One reason to participate in this kind of note is you are 22% return on the note above initial level. Risk to this note is exposure to initial principal. This note would be suitable to some investors who have captured good returns on the note and are willing to forgo some of those returns in exchange for 22% returns.
Interest rate linked issuance limited to standard, step up callable notes and Fixed rate notes. Activity has been subdued this week.Citigroup, Wells Fargo are major issuers of these products. There has been some Range accrual note issuance.
This week we have seen commodity note issuance tied to WTI crude oil. There has been a quanto note based Equity index has been issued by Credit Suisse. We will discuss later the details of this note.
Size of the note types will tell us an indication of what type structures are popular among the investors and where money is flowing. Below chart shows this theme
Popular notes have been interest rate linked notes.
Now moving on to issuers side and understanding their market penetration or competitor analysis provides some interesting insights.
This week UBS, MS, GS and Barclays captured issuance market share.
Market penetration is driven by the issuer depth in each of the asset classes. Every issuer has presence in Equity linked issuance. Goldman is only issuer to produce Currency related issuance. Morgan Stanley and JPM are active players in the Hybrid related issuance.
Quanto Structured Notehas been issued by Credit Suisse. The notes are designed for investors who seek a return at maturity linked to the performance of the STOXX® Europe 600 Basic Resources Index and the European Union euro relative to the U.S. dollar (the number of U.S. dollars per one European Union euro), as adjusted by the Participation Rate. Investors should be willing to forgo interest and dividend payments and, if the Underlying and the European Union euro relative to the U.S. dollar, declines by more than approximately 0.79365%, be willing to lose some or all of their investment.
For additional details please refer to the Issuance summary table.
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