Market snapshot

The Euro Stoxx 50 index was a popular underlying for structured products launched in the US public market in September, accounting for around 15% ($150 million) of issuance and marking a revival of interest in Europe, as well as an increasing willingness on the part of US buyers to look overseas for investment opportunities. But by far the most popular underlying in the US is the S&P 500, which was the basis of $588 million of structured products. The most common single-stock underlying was Apple, while MetLife and Halliburton also proved popular.

Most products issued in the US in September had maturities of around 12 months. The average barrier for new 12-month reverse convertibles was 73%, the average coupon was 9.8%, and most products offered monthly income. The reverse convertibles with the highest coupon in September were trigger yield optimisation notes from UBS, which were linked to the common stock of Alpha Natural Resources and offered 21.65% per annum. The figure is attributable to the high volatility of the underlying asset, which currently stands at 75%, according to data used by FVC. Periods of high volatility increase the chances of a barrier breach significantly, and in order to balance the higher risk of the product, issuers try to attract investors by offering better terms.

The most popular product type in the US was the leveraged return note, which comprised over 57% of the market based on the notional amount. Part of the structure's appeal is the simplicity of its payout profile. Second most popular were autocallable bonds with a 9% share, followed by reverse convertibles with 8% of total issuance.

Bank of America led the US issuer table in September, with 30% of all products issued, based on the notional amount. It was followed by Royal Bank of Canada, which took 15% of the market, and Barclays with 13%.

In the UK, the most common underlying in September was, as usual, the FTSE 100, while the most prolific issuer of structured products was Investec Structured Products with a 27% market share. Royal Bank of Scotland was second, launching 19% of all products, and Morgan Stanley was third, accounting for 11% of total issuance.

Capital-at-risk annual kickout notes dominated the products brought to the UK market. Other popular structures were: principal-protected simple growth products and capital-at-risk growth products.

Market snapshot November 2012