Merrill sells $37 million notes linked to Asian currencies; Barclays prices $5 million ETF Plus notes

By Sheri Kasprzak

New York, Sept. 6 - Merrill Lynch & Co. priced a $37 million deal in the latest in the recent run of Asian currency-linked notes.

"Asian currencies have seen some strength lately and the dollar has seen weakness," said one market source. "The notes give investors the chance to invest in currencies like the [Chinese] yuan, which would be very difficult to access otherwise."

Beyond that, a number of Asian currencies have improved against the dollar, the market insider noted on Thursday.

The principal amount of the notes, the New York-based market insider said, indicates just how popular Asian currencies are among U.S. investors.

The notes are linked to the Chinese yuan, the Malaysian ringgit, the Singapore dollar and the Indonesian rupiah.

Déjà vu for some currencies

If some of these currencies seem familiar, it's no surprise. The yuan, ringgit and rupiah have been extremely popular in the structured products marketplace lately.

Last week, Barclays Bank plc priced $5 million in 95% principal-protected bear notes linked to the yuan, Indian rupee, Korean won and Thai baht and also priced $1.775 million in fully principal-protected notes linked to the yuan, rupee, rupiah, Japanese yen and ringgit.

The 95% principal-protected notes have a one-year term and pay 95% of the principal amount plus the principal amount times the product of the 300% participation rate and the basket performance, assuming the basket performance is equal to or greater than 0%.

If the basket performance is less than 0%, investors will receive $950 for every $1,000 in principal.

The fully principal-protected notes have a two-year term and pay the principal amount plus the principal amount times the product of the 205% participation rate and the basket performance if the basket performance is equal to or greater than 0%.

If the basket performance is less than 0%, investors will receive par at maturity.

Most recent notes

The one-year notes pay par times 127% participation rate times the ending basket value minus the initial basket value divided by the initial value at maturity, assuming the final basket level is greater than the starting value.

The investors will receive at least par at maturity.

Exchange rates

The Chinese yuan last traded against the U.S. dollar at 7.533, compared with 7.5608 a month ago.

On Thursday, the ringgit's exchange rate was 3.5018. A month ago, the exchange rate was 3.456.

The Singapore dollar traded against the U.S. dollar at 1.5228 on Thursday, compared with 1.515 a month prior and the rupiah traded at 9,395.48 against the dollar on Thursday. The rupiah had traded at 9,286.85 against the dollar a month ago.

Barclay's ETF notes

Elsewhere, Barclays Bank plc's recently priced $5 million in ETF Plus variable-rate coupon notes linked to the iShares MSCI Emerging Markets index fund.

The one-year notes pay interest equal to 2% plus any apportioned dividends, which will be the stated dividends per share of the ETF times the number of reference shares represented by each note. Each note represents a number of shares equal to par divided by the initial share price.

The initial share price is $133.95, the closing price of the ETF on the initial observation date.

Payout at maturity is par plus the share performance of the fund. The investors will share in any losses.

Merrill's $516 million in notes

In other structured products news, Merrill announced the terms of a huge deal, $516 million in Accelerated Return Notes linked to the S&P 500 index.

The notes have a 14-month term and pay par plus three times any gain on the index, capped at 18.87%.

If the S&P 500 declines, investors participate in any losses.

The initial index level is 1,463.76.

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