Barclays prices $5 million in 95% principal-protected bear notes linked to currency basket

By Sheri Kasprzak

New York, Aug. 30 - Barclays Bank plc priced $5 million in 95% principal-protected bear notes linked to a basket of Asian currencies and those notes indicate an expected improvement in the Asian markets, according to one market source.

Elsewhere, Barclays priced $1.775 million fully principal-protected notes linked to another basket of Asian currencies.

"Some Asian currencies are improving [against the dollar]," said one market source on Thursday.

"With weakness in the dollar recently, some investors are looking to other currencies and Asia seems to be the place they're going, again and again, at least over the past few weeks."

When asked about drops in some of these currencies, the market source said he feels that despite recent declines, there is an expectation that those currencies will come back. The two Barclays notes have a one-year and a two-year term, respectively, and the term of the notes may be a factor.

"Just because the currencies have dropped recently doesn't mean that over the next year, the next two years, they won't come back and perform very well against the dollar," he said.

95% capital protected notes

These notes are linked to equal weights of the Chinese yuan, the Indian rupee, the Korean won and the Thai baht.

The one-year notes pay 95% of the principal amount plus the principal amount times the product of the 300% participation rate and the basket performance, assuming the basket performance is equal to or greater than 0%.

If the basket performance is less than 0%, the investors receive $950 for every $1,000 in principal.

Principal-protected notes

The fully principal-protected notes are linked to the Chinese yuan, the Indonesian rupiah, the Indian rupee, the Japanese yen and the Malaysian ringgit.

The notes have a two-year term and pay the principal amount plus the principal amount times the product of the 205% participation rate and the basket performance if the basket performance is equal to or greater than 0%.

If the basket performance is less than 0%, investors receive par at maturity.

Other similar notes

Barclays priced similar notes in late July. The investment bank priced $2 million in zero-coupon principal-protected notes linked to a basket of other Asian currencies.

Those notes have a two-year term and are linked to equal weights of the Chinese yuan, the Indonesian rupiah, the Indian rupee and the Japanese yen, all against the U.S. dollar.

If the currencies strengthen against the dollar, payout at maturity will be par plus a 212% participation rate. If the currencies weaken relative to the dollar or remain flat, payout is par.

Citigroup Funding Inc., also in late July, priced $30 million in zero-coupon, 95% principal-protected notes linked to a basket that includes equal weights of the Brazilian real, the Russian ruble, the Indian rupee and Chinese yuan.

For each $1,000 note, the payout will be $950 plus the absolute value of any increase in the basket currencies relative to the dollar, multiplied by a 440% participation rate.

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