SPDR-linked bonds show optimism for S&P 500; Credit Suisse S&P-linked ARES deliver seven times leverage

By Sheri Kasprzak

New York, Feb. 3 - A few offerings linked to either investment trusts that track stocks listed on the S&P 500 index or securities linked directly to the S&P 500 may be an indication that some investors are getting a bit more optimistic about the index, said one market source reached Tuesday.

Both Eksportfinans ASA and ABN Amro Bank NV recently announced sales of securities linked to the SPDR Trust Series 1 - a trust that issues Standard & Poor's Depositary Receipts. Those receipts track the S&P 500's top stocks, including AT&T, Citigroup, Microsoft, IBM, General Electric, Exxon Mobil, Johnson & Johnson and Procter & Gamble.

"The good thing about this trust is that you're not investing in the whole index [the S&P 500]," said one sellside source reached Tuesday afternoon.

"You're getting the top of the top, really. The movements you have to be most concerned about are the biggest companies listed, so there is a comfort factor there."

Even so, in this stock market, there's plenty to be concerned about, the sellsider noted.

"It is a risky investment, even just tracking the biggest companies. No one's immune from taking a hit."

The S&P 500 was up on Tuesday, gaining 13.07, or 1.58%, to close at 838.51.

Eksportfinans sells $4.35 million

In the recent Eksportfinans sale, the investment bank sold $4.35 million in 10% enhanced yield securities linked to the trust for Wachovia Capital Markets.

Those one-year securities pay par unless the shares in the fund fall by 30% or more during the life of the notes and ends below the initial share price. If that happens, the investors get a number of fund shares equal to $1,000 divided by the initial share price.

On Tuesday, ABN Amro said it will price 11.5% Knock-in Reverse Exchangeable Securities linked to the trust.

The one-year securities pay par at maturity unless the fund falls by more than 20% during the life of the notes and ends below the initial share price. The investors would then receive a number of fund shares equal to $1,000 divided by the initial share price.

Those notes are set to price Feb. 13.

On Tuesday, the trust (AMEX: SPY) ended the day up $1.16, or 1.4047%, at $83.74.

Credit Suisse S&P 500 notes

In other S&P 500 news, Credit Suisse, Nassau Branch is planning to sell zero-coupon Buffered Accelerated Return Equity Securities linked the S&P 500 with seven times leverage.

The 18-month notes pay par plus 700% of any index gain, with a return cap of 25% to 28%, to be determined at pricing.

Investors receive par if the index falls by up to 10% and are exposed to any losses beyond 10%.

The deal is slated to price Feb. 24.

UBS plans euro/dollar notes

Elsewhere, in an offering that is a bit less optimistic about the health of the U.S. economy, UBS AG said Tuesday it plans to offer principal-protected barrier notes linked to the euro versus the dollar.

The two-year notes pay par plus the principal amount times the currency return times a participation rate of 100%, assuming the reference rate never trades above the barrier level and assuming the currency return is greater than zero. The barrier level is expected to be between 133% and 137% of the initial spot rate.

If the reference rate never trades above the barrier level during the observation period and the currency return on the final valuation date is less than or equal to zero, investors receive par at maturity.

Assuming the reference rate trades above the barrier level at any time during the observation period, investors can expect to receive par plus the conditional amount of 4% of the principal amount at maturity.

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