During the week of October 14-18, 2013 structured note issuance has been 8.17 Bn across various issuers and asset classes. Most of the issuance (7.7 Bn) is driven by Interest Rate Linked notes and 372 MM of the issuance is driven by Equity 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 ( Zillow, Hess Corporation, Occidental Petroleum Corporation, Baidu, Inc)
Notable notes this week were tied to Occidental Petroleum Corporation (46 MM) issued by Credit Suisse. This note belongs to the class of leveraged and Yield Enhancement type. Morgan Stanley created a note Cusip:22539T555with a size of 46 MM paying 8% coupon income.On the upside this note pays 65% appreciation in the underlying. On the downside this note is protected beyond 80% decline in the underlying.One reason to participate in this kind of note is you are getting 8% coupon return. Another deal created by JPM on Zillow company Cusip:48126NYN1 belongs to Reverse convertible type. This note provides 17.25% return with principal at risk.
Interest rate linked issuance limited to standard, step up callable notes and Fixed rate notes. Activity has been subdued this week.Citigroup, Wells Fargo and Ford motor are major issuers of these products.
There has been some issuance activity in Currency segment of the markets. Goldman issued note linked to BRL with protection on losses up to 30% depreciation in the BRL exchange rate and potential to gain 30% if the currency appreciates above 3%.
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.
For additional details please refer to the Issuance summary table.
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