During the week of July 1-25, 2014 structured note issuance has been 44.3 Bn across various issuers and asset classes. Most of the issuance (2.75 Bn) is driven by Equity Linked notes and 41.4 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.
This week has been a slow week with most of the issuances taking place on Tuesday. There are a few interesting notes. The DAX Index was used as the underlying for three of them. Deutsche Bank issued a note on Delta Air Lines, Inc for total notional $11.9 million. One of the bigger notional was issued by J.P Morgan at $148 million on the J.P. Morgan Enhanced Beta Select Backwardation Alternative Benchmark Total Return Index. Another interesting note is by Barclays on the International Paper Company as a Synthetic Convertible Note at a notional of $41.7 million. Finally UBS used a different variation of their usual notes by issuing Phoenix AutoCallable Notes for six different companies at $500,000 each.
Interest rate linked issuance limited to standard, step up callable notes and Fixed rate notes. Activity has been subdued this week.Citigroup, RBC and few other 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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