Morgan Stanley prices leveraged ETN linked to euro; Market interest in euro high, distributor says

By Kenneth Lim

Boston, May 7 - Morgan Stanley priced two series of exchange-traded notes on Wednesday linked to leveraged long and short views on the euro.

The notes arrive as the euro is in play amid speculation about interest rates in Europe and the outlook for economies across the Atlantic, a distributor said.

"Investors have been taking a closer look at the euro, I'd say maybe the last month or so," the distributor said.

Morgan Stanley launches ETNs

Morgan Stanley said it priced a $50 million issue of zero-coupon Market Vectors - Double Short Euro exchange-traded notes due April 30, 2020 linked to the Double Short Euro index.

The notes will pay par of $40 plus the index return minus an annual investor fee of 0.65%. The index generally gains 2% for every 1% that the euro falls against the U.S. dollar, and loses 2% for every 1% that the euro gains against the U.S. dollar.

The notes will be listed on NYSE Arca under the symbol "DRR."

Morgan Stanley also priced a $50 million issue of zero-coupon Market Vectors - Double Long Euro exchange-traded notes due April 30, 2020 linked to the Double Long Euro index, according to an FWP filing with the Securities and Exchange Commission.

The payout at maturity will be par of $40.00 plus the index return minus an annual investor fee of 0.65%. The index generally gains 2% for every 1% that the euro appreciates against the U.S. dollar, and loses 2% for every 1% that the euro falls versus the U.S. dollar.

The double long notes will be listed on NYSE Arca under the symbol "URR."

"Market Vectors' new leveraged index products should appeal to investors who are interested in doubling short-term movements in the markets or employing hedging strategies to manage risk," said marketing agent Van Eck Global's principal, Jan van Eck, in a statement. "These ETNs provide investors a more capital-efficient way to take directional positions on the euro."

Morgan Stanley structured product origination managing director Jeffrey Barany said in the statement: "With investors increasingly looking for new vehicles to access currencies, we are excited to provide a simple way for investors to express a leveraged bullish or bearish view on the euro."

Interest in euro high

Investors have been looking more closely at the euro recently following developments in interest rate policies, the distributor said.

"In the U.S. you had the Fed cutting interest rates; the market believes that's going to be the last one for some time, so that's one part of the equation," the distributor said. "The other part is now over in Europe, there's speculation about whether they are going to lower their interest rates. There are a lot of investors now, definitely more than a few months ago, who think the U.S. dollar may have stopped falling, that the euro may now start to come down."

Notes offer short-term exposure

The notes will likely attract investors who have a short-term view of the euro's direction, the distributor said.

"I'd say it's going to be more of a short-term investment," the distributor said. "The exchange-traded structure lets you get in and out of the strategy at any time, so that should be attractive for a lot of investors."

The notes could also be an easy way for investors to access the currency market, the distributor said.

"I think it really provides access across the board," the distributor said. "It's a simple way to gain exposure to the currency markets, because most brokers out there will be able to carry out the deals for you, and you don't have to go out and set up a separate account. These are also leveraged products, so if you're confident about your view of where the euro is going, these will offer you a better return than many other options in the market."

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