Russell 2000 interest continues; RBC sells 30.75% reverse convertibles tied to Las Vegas Sands

By Sheri Kasprzak

New York, Aug. 31 - More notes were seen Monday linked to the Russell 2000 index as continued volatility in the index makes it appealing to investors.

Barclays Bank plc said Monday that it priced $5.5 million in Buffered Super Track notes linked to the index. JPMorgan Chase & Co. announced plans to bring buffered return enhanced notes linked to the index.

Barclays' two-year notes pay par plus double the index return for every $1,000 in principal, subject to a 42.3% maximum return, at maturity, assuming the final level is greater than the initial level. If the index return is less than or equal to zero and greater than or equal to the negative 10% buffer, investors will receive par at maturity. If the index return breaks the negative 10% buffer, the investors receive the principal amount plus par times the sum of the index return and 10%. Investors lose 1% for every 1% drop beyond the 10% buffer.

The initial index level for the Barclays notes is 583.77.

JPMorgan, meanwhile, plans to sell buffered return enhanced notes linked to the index. Those 15-month notes pay triple the appreciation on the index up to a maximum return of between 18% and 21%. The notes are expected to price Sept. 25.

The JPMorgan notes also have a 10% buffer level.

Index seen as volatile

One analyst said late last week that the index, while common in the U.S. structured products market, may be seeing more popularity because of volatility within it.

"At the moment, I believe that the volatility of this index is greater than that of the S&P 500, which as far as terms go for a capital-at-risk product like this, mean that issuers are able to offer much more attractive terms to investors," said Suzi Hampson with Future Value Consultants in London.

"On the other hand, as far as downside risk is concerned, the higher volatility of the Russell 2000 does mean that the product will most likely score higher on our risk map, indicating there is a higher chance of loss to capital."

HSBC USA Inc. and Bank of America Corp. both announced upcoming notes linked to the index last week. HSBC also sold $5.5 million of Russell 2000-linked notes.

RBC prices 30.75% reverse convertibles

In other news Monday, RBC Capital Markets Inc. priced $119,000 in three-month reverse convertible notes linked to shares of Las Vegas Sands Corp.

The notes have a 30.75% coupon and pay par plus interest unless the final share price is less than the initial share price and the closing price of the stock is less than the barrier price at any time during the monitoring period.

"Typically, when you see a coupon like this, it indicates some volatility for that reference stock," said one sellside source reached during the afternoon.

On Monday, shares of Las Vegas Sands were down 46 cents to end at $14.26 (NYSE: LVS). Over the past month, the company's stock jumped from $9.70 on Aug. 3 to $14.51 on Aug 28.

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