New Invest Ideas

New structured notes for you:


7th January: 3Y USD RC on global Indices, 4.32% p.a. 55% low strike

The investment strategy, suggested on the 07th of January 2019, was engineered following the spike in volatility end of 2018. Such spike meant better terms (coupon, protection, duration, etc) to issue such investment strategy and therefore a better entry point for qualified investors. If we were to issue such strategy today the coupon be lower (2.88% p.a. guaranteed as of 26th of March 2019 vs 4.32%)

For those who invested in this strategy back then, they could be cashing-in June (six month later) a return of 2.16% in USD

Below a summary of the solution showed, back in January 7th

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 3 Years
Underlying (WO) Nikkei 225 (NKY), FTSE 100 (UKX), S&P 500 (SPX)
Frequency Semi-annually
Guaranteed coupon 4.32% p.a.
Leveraged put 55%
Investor Profile Neutral Conservative
Delivery Cash
Alternatives also showed on the 7th of January EUR, Low strike 55%, 1.50% p.a. guaranteedGBP, Low strike 55%, 2.88% p.a. guaranteed

Mechanism

In all cases, qualified investors get a 4.32% p.a. guaranteed coupon paid semi-annually (total return = 12.96%)


Scenario 1:At maturity, WO is up by 10% from its initial level (above 55% Leveraged put)
Payoff:Qualified investors get 100% capital back + 2.16% coupon (4.32% p.a.)

Scenario 2:At maturity, WO is down by 60% from its initial level (below 55% Leveraged put)
Payoff:Qualified investors get 72.73% (40%/55%) capital back + 2.16% coupon (4.32% p.a.)

The following graph represents the performance of the underlyings:

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7th January: 1Y USD BRC WO on WTI and Brent, 9.16% p.a. guaranteed

Since the end of 2018, oil seemed to be under pressure. For qualified investors willing or used to trade and invest in oil-related instruments (via futures), the enclosed strategy was engineered around two oil commodities, Brent and Crude (WO) to get better return and protection

The strategy presented on the 07th of January 2019, offered a guaranteed return of 9.16% p.a. and a 30% protection buffer after 3 years (equivalent to 33.964 for WTI and 40.131 for Brent). If we were to issue the strategy today, qualified investors would cash in a coupon of 2.00% p.a. guaranteed (refreshed on the 29th of March 2019) with a 50% protection and a less favourable entry point as both underlyings have recovered already by around 20% (if we were to offer similar protection on the downside with spot references back in January)

For those who invested in this strategy back then, they would have cashed in March (three month later) a return of 2.29% in USD and would be less exposed to the downside compared to investing today (Brent +19%, WTI +23% since strategy showed)

Below a summary of the solution showed, back in January 7th

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 1 Year
Underlying (WO) WTI (CL1), Brent (CO1)
Frequency Quarterly
Guaranteed coupon 9.16% p.a.
European barrier 70%
Investor Profile Sophisticated Speculative
Delivery Cash

Mechanism

In all cases, qualified investors get a 9.16% p.a. guaranteed coupon paid quarterly


Scenario 1:At maturity, WO is up by 10% from its initial level (above 70% European Barrier)
Payoff:Qualified investors get 100% capital back + 2.29% coupon (9.16% p.a.)

Scenario 2:At maturity, WO is down by 40% from its initial level (below 70% European Barrier)
Payoff:Qualified investors get 60% capital back + 2.29% coupon (9.16% p.a.)

The following graph represents the performance of the underlyings:

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4th February: 5Y USD 100% KG Callable Step Up Note, 3.18%-3.98% p.a.

The yield curve at the end of last year inverted between the 2-5 years maturities and compressed transversely. The yield topology expressed usually the increase of recession fears which the FED cannot ignore. On the 04th February 2019, the recent tightening path spilled globally and slowed economic activity, and the FED should be aware not to provoke recession

The enclosed strategy offered a guarantee of the capital initially invested, in 5 years unless earlier called. The qualified investor would receive a first guaranteed coupon of 3.18% after one year, if not called in the following years the coupon steps up by 20 bps every year. This strategy would fit qualified investors with a neutral view of rates with potentially rates going down overtime. The callability of the investment is at the discretion of the issuer and callability usually happens if rates have gone down

The strategy refreshed as of 29th of March 2019 offers now a 2.70% p.a. coupon after one year, 48bps less than when we showed it

Below a summary of the solution showed, back in January 4th

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 5 Years unless issuer called
Capital protection 100% at maturity
Guaranteed coupon Y1 3.18% p.a.
Guaranteed coupon Y2 to 5 3.38%, 3.58%, 3.78%, 3.98% (0.20% step up per year, until maturity, unless issuer called)
Frequency Annually (30/360 basis)
Max payout 117.90%
Comparable 5Y USD Swap rate (spot 2.527%)
Delivery Cash
Investor Profile Neutral sophisticated

Mechanism

Scenario 1:After 1 year, rates are lower than today (comparable is 5Y Annual Swap USD)
Payoff:The issuer will probably call the Note and qualified investors get 3.18% coupon. Product might early redeem

Scenario 2:After 3 years, rates are higher than today (comparable is 5Y Annual Swap USD)
Payoff:The issuer will probably not call the Note and qualified investors get 100% capital back + 3.58% coupon = 103.58% (6.56% already paid). Investment continues

Scenario 3:At maturity, if the Note has not been called by the issuer
Payoff:Qualified investors get 100% capital back + 3.98% coupon = 103.98% (13.92% already paid)

The following graph represents the performance of 5Y USD Swap:

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4 March: 5Y USD CLN Hybrid Brazil and USD 3 Month Libor, 6.04% p.a.

Since Bolsonaro was elected on the 28th of October 2018 for a term of 4 years, markets have shown confidence in the intended reforms of Brazil's new president - placing a pro-business American style aura in the country. Conditions have softened, as a consequence of the change in credit risk of the Federative Republic of Brazil

The strategy offered a potential enhancement of yield when comparing to investing into Brazilian sovereign debt over 5 years. The coupon of 6.04% p.a. paid quarterly was dependent not only on a possible credit event of Brazil but also on the 3 months USD Libor ($3mL) daily movement. The coupon accrues daily as long as $3mL quotes within the range [2% - 5%]

The Credit Default Swap (CDS) increased slightly since first priced (24th of January 2019, +10.28%). On the other hand, rates seem under pressure. Overall it could still be a good time to consider such investment if your profile and conviction fit

Below a summary of the solution showed, back in March 4th

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 5 Years
Exposure credit Brazil Sovereign CDS (level 173.032)
Exposure rates USD 3m Libor (spot 2.76)
Market recovery At maturity
Conditional coupon 6.04% p.a. * n/N
Convention Quarterly, 30/360 basis, accrued unless credit event
Investor Profile Neutral sophisticated
Delivery Cash
Pricing Date 24/01/2019
  n = # of days where $3mL is in the range [2% - 5%] N = # of days in the period

Mechanism

In all cases, qualified investors get a 4.32% p.a. guaranteed coupon paid semi-annually (total return = 12.96%)


Scenario 1:During Q1, $3mL traded daily within the range [2% - 5%] and there was no credit event on Brazil
Payoff:Qualified investors get 1.51% coupon (6.04% p.a.), the investment continues

Scenario 2:At the end of Q8, $3mL traded 10 days out of the range and no credit event occurred
Payoff:Qualified investors get 1.34% coupon (1.51% p.q. * 80/90), the investment continues

Scenario 3:At the end of Q12, a credit event occurred, regardless of how $3mL traded
Payoff:Market recovery determined by ISDA, paid at maturity. No coupon paid

Scenario 4:At maturity, during Q20, $3mL traded daily within the range [2% - 5%] and there was no credit event on Brazil
Payoff:Qualified invertors get 100% capital back + 1.51% coupon (6.04% p.a.)

Credit Event:If a credit event occurs, further coupons are forgone and the CLN will redeem at the final auction settlement price determined by International Swaps and Derivatives Association (ISDA: www.isda.org)

The following graph represents the performance of the Credit and Rates exposures:

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18 February: 1Y USD LS 85% RC on USD 3 Month Libor, 8.20% p.a. guaranteed

The enclosed strategy, suggested on the 18th of February 2019, was engineered following a market selloff in US equities and a slowdown in FED hiking cycle

This strategy was suitable for qualified investors with a view on US rates over one-year horizon. Since the pricing date, $3mL decreased by 1.61% but the lower barrier (-15%, equivalent 2.278) has never been reached. Qualified investors will benefit, at maturity from conditional capital protection (low strike 85%) and an 8.20% p.a. guaranteed coupon

Below a summary of the solution showed, back in February 18th

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 1 Year
Underlying USD 3 Month Libor (US0003M Index)
Spot 2.68
Leveraged put 85% (equivalent: 2.278)
Floor 0%
Guaranteed coupon 8.20% p.a. paid at maturity
Delivery Cash
Investor Profile Bearish Speculative
Alternatives also showed on the 18th of February 3 Months, USD 5.15% p.a.; 12 Months, EUR 4.35% p.a.

Mechanism

Scenario 1:At maturity, $3mL is up by 10% from its initial level (above 85% Leveraged put)
Payoff:Qualified investors get 100% capital back + 8.20% coupon

Scenario 2:At maturity, $3mL is down by 20% from its initial level (below 85% Leveraged put)
Payoff:Qualified investors get 94.12% (80%/85%) capital back + 8.20% coupon

The following graph represents the performance of the underlying:

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4th March: 9M USD Outperf on Coffee, 175% participation, Max redemption 152.50%

The enclosed strategy was engineered for qualified investors that had a view on Coffee over the following nine months and play the increase of the coffee price

In 2018, the estimated total demand for coffee has been around 9.7M tons whereas the estimated coffee production for 2019 is at 10.01M tons. The possibility of China and India increasing coffee consumption to developed countries levels should push Coffee prices up. Also, if the US dollar starts to lose ground against LatAm currencies, local farmers should be disincentivized to exporting extra amounts of coffee (the case in 2018), causing the supply to further contract

For qualified investors looking to have an exposure to the commodity, the enclosed strategy offers leveraged exposure of 1.75 times on the upside over 9 months with a maximum payout at 152.50%. As the coffee price decreased since the 4th of March, it is maybe still a good time to take a coffee boost

Below a summary of the solution showed, back in March 4th

Product Parameters

Issuer rating BBB (rated by S&P)
Currency USD
Maturity December 2019
Underlying Coffee (KCZ9 Comdty)
Downside participation 100%
Upside participation 175% on call spread 100-130%
Max payout 152.50%
Strike 100%
Investor Profile Bullish Speculative
Delivery Cash
Alternatives also showed on the 4th of March: Outperf on (EW) Starbucks, Mc Donald's, Coca-Cola, Nestle, 177.40% upside participation, no cap

Mechanism

Scenario 1:At maturity, Coffee is up 25%
Payoff:Qualified investors get 100% capital back + 43.75% participation (25% * 175%)

Scenario 2:At maturity, Coffee is up 37%
Payoff:Qualified investors get 100% capital back + 52.50% (cap is reached)

Scenario 2:At maturity, Coffee is down 20%
Payoff:Qualified investors get 80% capital back

The following graph represents the performance of the underlying:

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