HSBC to price CD linked to Asian indexes through LaSalle; some reverse convertible coupons get smaller

By Sheri Kasprzak

New York, Dec. 4 - HSBC Bank USA Inc. led structured products news Monday with plans to price Far East Opportunity point-to-point certificates of deposit through LaSalle Financial Services, Inc. The CD is not the only certificate of deposit gearing up to price. Rabobank NV is getting ready to price a somewhat similar deal.

CDs, one market source said, are an area his investment bank is looking at more and more because investors love them.

"They [investors] absolutely love them," he said. "It's a pretty common investment so they have a certain amount of familiarity with them. They feel comfortable with them. I can't mention any particular deals for obvious reasons, but we have been getting more calls from investors about them."

Another market source said recently that CDs are popular because they're insured by the Federal Deposit Insurance Corp.

HSBC's CDs

The five-year CDs HSBC plans to sell are linked to the MSCI Taiwan, MSCI Singapore Free, Hang Seng China Enterprises and Nikkei 225 indexes.

The CDs are set to price through LaSalle on Dec. 21.

Each of the indexes carries one quarter weight in the basket.

"Emerging markets have kind of lost their luster," said one equity structurer. "I'm not seeing a lot of investor interest in EM stuff these days so to see CDs linked to some emerging markets indexes is interesting."

Similarly, Rabobank also plans to price a world basket certificate of deposit linked to the MSCI Singapore Free, Dow Jones EuroStoxx 50 and Nikkei 225 indexes. The CD is being offered through LaSalle as well.

The basket includes one-third weight of each index with a seven and a quarter-year term.

Some coupons getting smaller

As stock volatility winds down, some coupons linked to particular stocks are getting smaller.

For example, Rabobank is gearing up to price three-month 22% reverse convertibles linked to Rambus, Inc. Similar three-month notes were priced in September by HSBC with a 30% coupon. In June, JPMorgan Chase & Co. priced $2.106 million in 22% reverse convertibles linked to Rambus.

In November, Rambus's stock traded between $15.99 and $23.10 and throughout September, the stock traded between $15.88 and $19.04. The stock gained 36 cents on Monday to close at $21.87 (Nasdaq: RMBS).

"What it really boils down to is, how volatile is the [reference] stock," said one equity structurer when asked if coupons really are getting smaller.

"I'd say stock volatility in general is dying down but that doesn't mean you won't find a particularly volatile name that you'll have a larger coupon on."

Intel coupons lower

On Monday, Barclays Bank plc said it will price 8.55% reverse convertibles with a one-year term linked to Intel Corp. The coupon on reverse convertibles linked to Intel has slipped gradually since August.

In August, ABN Amro Bank NV priced $295,000 in reverse convertibles with an 11.5% coupon and a one-year term.

In October, HSBC priced $250,000 in 9% reverse convertibles linked to the stock and in September, Barclays priced one-year 9% reverse convertibles linked to Intel.

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