Lehman Brothers plans notes linked to 10 currencies; Barclays prices two currency-linked offerings

By Sheri Kasprzak

New York, April 25 - Currency-linked notes continued to grab structured products headlines on Wednesday as Lehman Brothers Holdings Inc. geared up to price Global Cash Total Return Yield Notes linked to 10 currencies and Barclays Bank plc negotiated the terms of two 100% principal-protected notes linked to the currency exchange rates between the U.S. dollar and several Asian currencies.

"When you're talking about Asian currencies, I'd say the two to watch right now are the yuan and the rupee," said one market source. "Both China and India's economies are growing at a fantastic clip so investors want to get in on the action, for certain. We're seeing an amazing amount interest in those countries in particular."

Another market source pointed out that the Chinese economy is poised to grow by almost 11% in 2007, a fact that makes it incredibly appealing to investors despite the fact that the Chinese government restricts movements in the exchange rate of the renminbi.

In fact, several offerings this week and last week have been linked to baskets of notes that include both the Chinese renminbi and the Indian rupee.

Rupee is part of basket

The rupee is part of a basket of 10 currencies that are part of Lehman's 7.48% Global Cash Treyns expected to price soon.

The basket also includes long positions in the Brazilian real, the Mexican peso, the Turkish lira, the Hungarian forint, the Indonesian rupiah, the Norwegian krone, the British pound sterling and the Australian and New Zealand dollars. The notes take a short position in the U.S. dollar.

The one-year notes pay par plus the basket return and investors are exposed to any declines in the basket.

Barclays prices two

In two other currency-related offerings, Barclays priced $8.98 million and $3.27 million in 100% principal-protected notes linked to, among other currencies, the yuan and the rupee

Both notes include in equal weights the Chinese yuan, the Indonesian rupiah, the Japanese yen, the Indian rupee and Malaysian ringgit, all versus the U.S. dollar exchange rate.

The payout on the $8.98 million in notes, if the basket performance is greater than or equal to 0%, will be par plus the principal amount times the 170% participation rate and the basket performance. Investors will receive par at maturity otherwise.

Payout on the $3.27 million in notes, if the basket performance is equal to or greater than 0%, will be par plus the principal amount times the 220% participation rate and the basket performance.

Morgan Stanley plans notes

In other currency-related offerings, Morgan Stanley announced plans to price 0% currency-linked capital-protected notes linked to the Brazilian real, the Chinese renminbi, the Hungarian forint, the Indian rupee, the Mexican peso and the Turkish lira, all equally weighted, relative to the U.S. dollar.

The two and a half-year notes pay par plus the greater of 25% or double the basket gain if the basket performance is positive and par if the basket performance is negative.

Morgan Stanley also plans to price 0% currency-linked capital-protected notes linked to the Australian dollar, the British pound, the euro and the New Zealand dollar, all equally weighted.

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