HSBC, Rabobank to price certificates of deposit linked to index baskets

By Sheri Kasprzak

New York, July 3 - As market insiders prepared for a respite in the middle of the week - the Independence Day holiday - HSBC Bank USA, NA and Rabobank NA were both in structured products headlines with certificates of deposit both linked to index baskets.

"CDs are familiar," said one market insider. "Investors know them, they're not some strange structure with a weird-sounding name that could mean any number of things. That makes them reasonably popular with investors. Most investors know what they're getting."

Both the HSBC and Rabobank CDs are being sold through LaSalle Financial Services, Inc.

HSBC CD terms

Looking to the five-year HSBC CDs, the securities are linked to equal weights of the Nikkei 225, the Hang Seng China, the MSCI Taiwan and the Singapore Cash indexes.

The index return on each index will be calculated as the percentage change between the initial fixing level and the final index level. The variable return on the basket will be the average of the four index returns, subject to a minimum return of 0%.

Rabobank CD terms

The 110% principal-protected Rabobank CDs are linked to equal weights of the S&P 500, Nikkei 225, Dow Jones Euro Stoxx 50 and MSCI Singapore Free indexes.

The five and a half-year notes pay par plus a supplemental amount equal to the deposit amount multiplied by the world basket return. There is a minimum supplemental amount equal to 10% or $100,000 per $1,000 CD.

Index performance

Moving to the performance of each of the indexes in the baskets, the Nikkei 225 closed up 3.60 on Tuesday at 18,149.90. A month ago, the index closed at 17,958.88.

The S&P 500 index closed up 5.44 at 1,524.87 on Tuesday and a month ago, closed at 1,536.34.

The Dow Jones Euro Stoxx 50 index gained 42.75 to close at 4,513.01 on Tuesday. In early June, the index closed at around 4,565.

The MSCI Singapore Free index closed at 572.349 on Tuesday. A month prior, the index closed at 584.93.

The Hang Seng China index closed up 348.41 on Tuesday to end at 22,151.14 and closed at 20,602.87 a month before.

The MSCI Taiwan index closed at 303.83 on Tuesday, closing at 283.95 a month before.

SG plans commodity-linked notes

Elsewhere, SG Structured Products, Inc. is negotiating the terms of multi-booster notes linked to equal weights of light sweet crude oil, grade A copper, primary nickel, special high-grade zinc and primary aluminum.

The five-year notes pay par plus the basket return if the basket increases by 7% or more. At the end of the each year from the first through the fourth, a coupon of 7% will be paid if the basket return is positive. Otherwise, no coupon will be paid.

If the basket increases by less than 7%, payout will be par plus 7%. Investors will receive at least par at maturity.

The notes are set to price July 26 and are being sold through LaSalle Bank NA.

Tim Mortimer, a market analyst and managing director at Future Value Consultants in London, said recently that commodities are likely continue to be a presence in the structured products marketplace.

Mortimer also noted that including liquid commodities, like crude oil, in a basket of metals, is a good way to diversify the basket and expose investors to multiple types of commodities.

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