During the week of Aug4- Aug15, 2014 structured note issuance has been $18.5 Billion across various issuers and asset classes. Most of the issuance ($1.16 Billion) is driven by Equity Linked notes and $17.27 Billion 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 a good size activity. Notes have been created on variety of underlying. 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 ( Amazon, Apple, Genworth Financial, Market Vector Junior Gold Miners ETF, and so on). There has been significant activity around basket linked notes.
Comparing this week to last week there’s less notes being issued. Among the high notional notes is the $101 million on a Basket of 20 by BMO. Another one by Barclays is on General Electric for $80.8 million. Than GS on the TOPIX index for $19.4 million. JPM issues a note of $50.1 million on a basket of two. The Euro Stoxx 50 Index was used as an underlying by GS for a notional of $15.3 million. Deutsche Bank used a notional of $15.1 million and $14.9 million on SP 500 and MSCI EAFE Index respectively.
Interest rate linked issuance limited to standard, step up callable notes and Fixed rate notes. Activity has been subdued this week.Citigroup, GS and a few others are major issuers of these products.
This week we have seen commodity note issuance on Brent Crude Oil by J.P. Morgan, Deutsch Bank used WTI Crude Oil as an underlying for two notes and UBS issued a note on Corn with a notional of $2.1 million. Deutsche Bank issues a hybrid note on WTI Crude Oil and the Market Vectors Gold Miners ETF for $10.1 million.
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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