Deutsche, Lehman, Morgan offer currency-linked products

By Kenneth Lim

Boston, March 19 - The structured products market saw a number of currency-linked offerings announced on Wednesday, but the cluster of deals does not necessarily indicate a sudden spike in interest, an observer said.

Banks that brought currency-linked products included Deutsche Bank AG, London Branch, Lehman Brothers Holdings Inc. and Morgan Stanley.

Deutsche priced $2.2 million of zero-coupon principal-protected notes due March 22, 2012 linked to the Deutsche Bank Currency Returns (USD) index.

At maturity, if the index ends higher than its initial level the notes will pay par of $10 plus 2.04 times the index return. Otherwise the return will be par.

The Deutsche Currency Returns (USD) reflects equally weighted investments in the Deutsche Bank Carry index, the Deutsche Bank Momentum index and the Deutsche Bank Valuation index, which in turn reflect three different currency strategies.

Meanwhile, Lehman announced three currency products.

The Lehman zero-coupon principal protected note due 2012 is linked to a basket with equal weightings of the Singapore dollar, the South Korean won and the Japanese yen, all relative to the U.S. dollar.

Investors receive par plus 1.2 times any increase in the basket if the basket finishes higher, but will receive the principal amount if the basket ends flat or lower.

Lehman also announced a note due 2012 with the same structure but linked to a basket with equal weightings of the Chinese renminbi and the Indian rupee. The participation rate for those notes was set at 1.15 times.

The same structure was applied to Lehman's two-year series linked to a basket of Latin American currencies. The basket comprises equal weightings of the Brazilian real and the Argentine, Mexican and Chilean pesos. The participation rate for those notes was set at 2.15 times.

Morgan Stanley also got in the act, offering zero-coupon notes due 2011 linked to a basket of Asian currencies.

The basket comprises 25% weightings each from the Hong Kong dollar and Indian rupee, a 20% weighting from the Indonesian rupiah and 15% weightings each from the Malaysian ringgit and the Philippine peso.

The notes, which have a 95% capital protection, will pay $950 per $1,000 note plus 3.25 times to 3.55% any increase in the basket if the basket finishes above its initial level. Otherwise the payout will be $950 per $1,000 note.

A structurer said Wednesday's offerings do not necessarily indicate a spike in demand for currency-linked products.

"There's nothing in particular going on," the structurer said. "A lot of the clients we deal with deal in what we call 'calendar trades', which is when the clients occasionally require a certain type of product. We will launch one or two or three per month."

"There's no particular reason why they're happening now," the structurer said. "It's not unusual to see clusters of deals happening at certain times, maybe the start of the month or the end of the month or in the middle of the month in this case. But it doesn't mean there's anything special going on."

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