CDs grow in popularity; Barclays, Rabobank plan to price CDs linked to indexes

By Sheri Kasprzak

New York, Feb. 5 -Banks might be pricing more certificates of deposit in the structured products market because of the appeal to investors of the accompanying insurance, according to a market source reached Tuesday.

Both Barclays Bank plc and Rabobank NA announced recently that they plan to price CDs linked to a variety of indexes, and investors may be biting because of the FDIC insurance.

The indexes to be linked to the notes include the S&P 500, Nasdaq, the Russell 2000 and a world basket that includes the MSCI Singapore Free index, the Dow Jones EuroStoxx 50 index, the Nikkei 225 index and the S&P 500 index.

"For one thing, they're FDIC insured, so that's a bonus for investors," said one market insider.

"And they're just really familiar with investors. We're getting more and more retail investors going for structured products. Several of these notes are just plain confusing to retail investors. CDs are something just a regular guy off the street can go into any bank and buy, so they tend to appeal a little more to these types of investors."

Barclays' CDs

Among the offerings from Barclays is a CD linked to the S&P 500.

Those 13-month CDs do not pay interest but do have a conditional coupon of 12%, payable at maturity, assuming the index does not breach the lower barrier, which is the initial level multiplied by 88%, or the upper barrier, which is the initial level multiplied by 112%. The principal on the CDs is only protected if you hold the CD until maturity.

The CDs are set to price on Feb. 29.

The bank also plans to price CDs linked to the Russell 2000 index, and those are also set to price on Feb. 29.

The 18-month CDs have a conditional coupon of 18%, to be paid at maturity if the investors hold them until maturity, assuming the index stays within a range between the lower barrier, equal to the initial level multiplied by 82%, and the upper barrier, equal to the initial level multiplied by 118%.

Rabobank's planned CDs

Over at Rabobank, the bank plans to price 15-month range CDs linked to Nasdaq.

Those CDs are principal protected and pay a 15% coupon at maturity if the index never breaches the upper and lower barrier levels - which are 15% from the initial level on both ends.

Those CDs are expected to price on Feb. 26.

The bank also has an offering of principal-protected CDs linked to a world basket that includes the MSCI Singapore Free index, the Dow Jones EuroStoxx 50 index, the Nikkei 225 index and the S&P 500 index, in equal weights.

The eight-and-a-half-year CDs pay an amount equal to the sum of the deposit amount and the supplemental redemption amount, which is equal to the deposit amount multiplied by the basket return, assuming the redemption amount is not less than the minimal supplemental redemption amount, which is 0%.

Rabo plans to price the CDs on Feb. 29.

BofA plans Asian currencies notes

Elsewhere, Bank of America Corp. announced plans to price an offering of notes linked to a basket of Asian currencies.

The two-year zero-coupon notes are linked to equal weights of the South Korean won, the Indian rupee, the Indonesian rupiah and the Singapore dollar, all versus the U.S. dollar.

The notes pay par plus the principal amount times the basket performance times the participation rate, which is expected to be at least 100%, with the actual rate to be determined at pricing, assuming the basket performance is greater than zero.

If the basket performance is less than or equal to zero, the supplemental amount will be zero.

JPMorgan eyes commodities, index notes

In other news, JPMorgan Chase & Co. plans to price principal-protected notes linked to a basket of commodities and commodities indexes.

The notes are linked to 35% weighting of crude oil, 15% weighting of aluminum, 15% weighting of copper, 15% weighting in the S&P GSCI Precious Metals Index Excess Return, 15% weighting in the S&P GSCI Livestock Index Excess Return and 10% weighting in the S&P GSCI Agriculture Index Excess Return.

The four-year notes pay par plus the principal amount times the basket return times the participation rate, assuming the additional amount is not less than zero. The participation rate is expected to be at least 100% with the actual rate to be determined at pricing.

The notes are expected to price on March 10.

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