US investors play it safe with certificates of deposit as innovation brings new underlyings
Certificates of deposit have enjoyed star status in the US structured products market ever since Lehman Brothers proved that a bank issuer can go bankrupt. Opinions differ as to how they are weathering difficult market conditions in the US, but after years of being so plain, innovation is introducing more complexity to the products as they are linked to more exotic underlyings. By Hannah Collins
The safety-first mantra that continues to rule over US market sentiment manifests itself in persistent appetite for structured products based upon certificates of deposit (CDs). Backed by the Federal Deposit Insurance Corporation (FDIC), investors continue to flock to this ‘safe harbour'. But where once these financing techniques were coveted for the certainty they offered investors, there are distinct signs that greed for yield has returned. While this is apparent in the latest recovery in
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