Structured products issuance numbers lag 2018 year-to-date totals by 52% as of March 8

Chicago, March 13 – The structured products market saw 77 deals price in the March 3 week, approximately 3% of the 2,277 deals to price so far this year, according to data compiled by Prospect News.

This still leaves the year-to-date total lagging last year’s numbers by an impressive 52%. Year-to-date comparisons show that 3,308 deals had already priced by March 8, 2018.

Trailing 12-month deal totals can be helpful as the year is still relatively young. That number continues to shrink, though. Last week the trailing 12-month deal total was running at negative 7.47% and this week it fell nearly another percentage point to negative 8.33%.

The data is preliminary and that gap may narrow as more deals are added in upcoming days.

Deal size for the week

Only one deal last week cleared the $20 million mark. All other deals came in at under $10 million.

This is relatively proportionate to the prior week’s numbers when 13 deals priced that were more than $10 million in size, 2.4% of the deals pricing that week.

As reported last week, deal size is running smaller this year, in general. The average deal size this year is now $3.13 million compared with an average deal size of $3.94 million in the first two months (and one week) of last year.

Equity trade

New issues linked to equity continue to dominate the structured products landscape.

Merely in terms of weekly numbers, over 93% of the deals pricing last week were tied to equity. In the top 10 list, nine of the 10 deals were tied to equity indexes and two were tied to a single stock, Royal Caribbean Cruises Ltd. and Netflix, Inc.

Keeping mind that deals are often tied to multiple underliers, the top 10 largest deals of last week were tied to the S&P 500 index nine times, the Russell 2000 was linked three times, the Euro Stoxx 50 index was referenced in two deals and the Nasdaq-100 index made one appearance. The MSCI Emerging Markets index also made one appearance with the S&P 500 and the Euro Stoxx 50 in the third-largest deal from GS Finance Corp. for $7.98 million of trigger callable contingent yield notes.

Single stocks as underliers varied widely. The days where the same name appeared in nearly every deal are at least on hold, and there are far fewer notes tied to the FAANG stocks (Facebook, Inc., Alphabet Inc., Amazon.com, Inc., Netflix and Google). Of the previously commonly packaged five, Netflix appeared in last week’s underlier list four times and Amazon made one appearance.

The largest deals with single underlying stocks included the previously mentioned Royal Caribbean and Netflix deals. And, then the next three largest deals were tied to, in the following order: National Beverage Corp., Caesars Entertainment Corp. and General Motors Co.

This does not show a definitive move away from tech stocks, but it does capture in a snapshot a reasonably wide diversity in the single-stock underlyings which was apparent throughout the list of deals pricing last week.

GS tied to equity indexes

The Goldman deal for $24.99 million was nearly three times larger than any other deal pricing in the week ended March 8.

Pricing March 7, the trigger callable contingent yield notes were tied to the Euro Stoxx 50 index, the Russell 2000 index and the S&P 500 index.

The notes contained a call feature, an element that appeared in 71% of the deals pricing last week. This particular call feature was an option on any quarterly observation date.

A 9.55% annualized coupon will be paid if all three indexes close above 65% of their initial levels on the relevant quarterly observation date.

The payout at maturity, should the notes not be called, will be par unless the worst-performing index closes below 60% of its initial level, in which cases investors would be exposed to the return of the least-performing index.

Turkish lira

An unusual underlier appeared in the list, the Turkish lira measured relative to the dollar.

The deal, from JPMorgan, priced as $675,000 of digital notes maturing March 23, 2020.

Investors will see an 11.55% return if the currency return is positive or zero (i.e., the lira appreciates or remains flat relative to the dollar) or is negative (i.e., the lira depreciates relative to the dollar) but the final spot rate is less than or equal to the trigger value. The trigger value is 8.07728, or 150% of the initial spot rate.

A cursory look at the Prospect News archive reveals a rather rare underlier. Possibly last seen in September 2017, the lira turns up in a Deutsche Bank AG, London Branch deal of digital return notes tied to a basket containing the Russian ruble, the Turkish lira and the Polish zloty relative to the Swiss franc.

Top agents

GS Finance topped the agent table last week with only five deals, but having the largest deal, the agent’s weekly total was $39 million in issuance, 24.85% of issuance for the week.

JPMorgan Chase Financial Co. LLC followed with 18.83% of the issuance in 12 deals. And, UBS placed third with 30 deals and 13.47% of issuance.

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