Deutsche Bank plans notes linked to commodities index; Barclays prices Asian currency notes

By Sheri Kasprzak

New York, July 6 - Deutsche Bank AG, London Branch rounded out the week in structured products with plans to price 100% principal-protected notes linked to the Deutsche Bank Liquid Commodities Index - Optimum.

The index includes a 34.25% weight of crude oil, 20.83% weight of heating oil, 9.85% weight of gold, 12.97% weight of aluminum, 10.23% weight of corn and 11.87% weight of wheat.

Tim Mortimer, managing director of Future Value Consultants, a London-based derivatives products analysis firm, recently noted that the index seems to provide investors with a diversified exposure to a few commodities.

Mortimer, however, pointed out that most diversified commodities indexes have more than three types of commodities.

Terms of the notes

The 33-month notes pay the index return times the 100% participation rate at maturity, subject to a maximum return to be determined at pricing.

The notes are fully principal protected.

Deutsche Bank priced $8.643 million in double-opportunity securities linked to the Deutsche Bank Liquid Commodity Index - Mean Revision Excess Return last month.

That index included 36.14% crude oil, 15.68% corn, 15.68% wheat, 15.3% heating oil, 9.56% aluminum and 7.65% gold.

The notes have a one-year term and are not principal protected.

On Thursday, the DB Liquid Commodities index closed at 504.06.The index has made steady gains since its inception in the fourth quarter of 1988. The index started at 100 and the initial index level for this offering is 615.43, as of the second quarter of 2007. Last quarter, the index level was around 480.

Barclays' Asian currency notes

In other structured products news Friday, Barclays Bank plc priced $5 million in zero-coupon, principal-protected bear notes linked to a basket of Asian indexes.

The basket includes equal weights of the U.S. dollar against the South Korean won, the U.S. dollar against the Indian rupee and the U.S. dollar against the Chinese renminbi.

If the basket performance is equal to or greater than 0%, the investors will receive par plus the principal amount times the product of the participation rate - 185% - and the basket performance at maturity.

If the basket performance is less than 0%, the one-year notes pay par at maturity.

Merrill's $13.75 million PHLX notes

The recently priced $13.75 million in Accelerated Return Bear Market notes linked to the PHLX Housing Sector index from Merrill Lynch & Co. Inc. are very similar to notes recently reviewed by Tim Mortimer, managing director of Future Value Consultants, a London-based firm that analyzes derivatives products.

In a recent report, Mortimer pointed out that bear market notes are rarely linked to equities or equity baskets because equity products are assets that have to be owned by someone. Mortimer's report noted there should be a risk premium to give an average return higher than the risk-free rate.

Note terms

The 14-month Merrill notes pay triple the absolute value of any decrease on the index, capped at 36.1%.

If the index gains up to 10%, the investors can expect to receive par but if the index gains beyond 10%, the investors will lose proportionally to any gains beyond the buffer.

At the beginning of February, the index was trading around 255. The starting index level for Merrill's latest PHLX notes is 213.92, the lowest level since last November. Over the month of June, the index has seen a substantial slide after trading around 235 in early June.

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