US Wrap: Accelerated growth and reverse convertibles share the spoils

In a low-issuance US market, accelerated growth structures and reverse convertibles lead the way

Issuance volumes in the US have declined over the last few days to the extent that the end of last week saw only a single product issued. The latest offering includes a fairly even mix of accelerated growth and reverse convertible products.

This includes a reverse convertible from Barclays based on the stock of Anadarko Petroleum, which had its debt downgraded by Moody's from a Ba1 to a Baa3 on Friday because of its involvement in the BP oil spill in the Gulf of Mexico. The company owns a quarter of BP's ruptured Deepwater Horizon oil well.

The reverse convertible notes are a six-month investment, paying annual returns of 27.4%. There is a 70% protection barrier after which principal will be lost at the rate of 1:1. The product has a relatively low riskmap rating of 3.43 and the underlying has an annualised volatility rate of 50%.

The accelerated growth products in the latest issuance provide access to a broad range of equities. Goldman Sachs is offering a staple S&P 500 product, while JP Morgan is offering access to emerging markets, Europe and Australasia.

These indexes are popular underlyings in the US market and there have steadily been more and more products linked to non-US equities issued in the past few months. This includes a trend towards investing in Europe, as was seen in the single offering on Friday last week, an accelerated growth product from Barclays that tracks the Eurostoxx 50.

Source: FVC and SEC filings
For access to analysis of the US structured products market: www.structurededge.com