During the week of June 1-13, 2014 structured note issuance has been 10 Bn across various issuers and asset classes. Most of the issuance (1.8 Bn) is driven by Equity Linked notes and 8.1 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 few issuers.
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 ( Face Book, Amazon,Pulte Group, Apple, Yahoo and so on). There has been significant activity around basket linked notes. Looks there is high appetite from institutional investors to conduct their portfolio balancing process.
Notable notes this week were tied to SPX Index (144 MM) issued by Credit Suisse. This note belongs to the class of Leveraged Note type. CS created a note 22545F466with a size of 144 MM paying three times Market performance at maturity date (07/31/15) with a coupon capped at 10% and as long as index is above initial level. On the downside this note is exposed to one to one downside underlying performance. Motivation behind participating in this kind of note is to obtain 3 times leverage on the coupon. Another interesting note is on Ford Motor company stock. This looks very high notional for a stock like Ford Mortor company 40434C543 This note belongs to Yield enhancement type and providing a 7% quarterly coupon.
Interest rate linked issuance limited to standard, step up callable notes and Fixed rate notes. Activity has been subdued this week.Citigroup, RBC and AMERICAN HONDA FINANCE CORP are major issuers of these products.
This week we have seen commodity note issuance tied to Commodity Baskets and Crude Oil by Morgan Stanley..
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.
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