Structured products linked to the interest rates increased their sales volumes by 72% in the third quarter of 2023.
Some US$1.4 billion was invested in 124 products linked to the interest rates in September – the equivalent of a 15% share of the total US structured products market.
Sales volumes were down 10% year-on-year (YoY) and decreased by 24% compared to August when US$1.9 billion was collected from 129 products.
The highest monthly sales during 2023 where registered in January, when US$2.2 billion was gathered from 114 products, a figure that was topped in August 2022 when US$2.5 billion was invested in 129 products.
Sales for Q3 2023 stood at US$4.6 billion from 338 products – an increase of 72% quarter-on quarter (Q2 2023: US$2.7 billion from 296 products).
The average annual coupon for September, which at 5.9% reached its highest monthly level for 2023 to date, was up 1.3 percentage points YoY.
At 5.5%, the average annual coupon for 2023 YTD has been stable, with a high of 5.95 and a low of 5.2% (Feb 23) very different from full year 2022 when they varied between 1.7% (Jan 22) and 5.9% (Oct 22), averaging four percent for the year.
Eighty percent of the products issued in September pay a semi-annual coupon, with a further 15% offering quarterly coupon payments. For FY2023, the split between semi-annual and quarterly coupons is 71% and 26%, respectively, with the remaining three percent offering monthly coupon payments.
Citi’s Callable Fixed Rate Notes (17291QC44), was the best-selling product for the month with sales of US$93.3m. The one-year registered note pays a fixed coupon of 5.80% pa and has quarterly call dates. By comparison, the highest selling equity-linked structure in September, J.P. Morgan’s Capped Enhanced Participation Equity Notes (48134AZA6) on the S&P 500, only sold US$65.4m.
The highest selling interest-linked product of the year was J.P. Morgan’s Callable Fixed Rate Note (48133PDZ3), which collected US$307.5m in January.
All but one of September’s interest-linked issuance had a callable feature, the exception being Buffered Digital Notes (48133WR26) – another product from J.P. Morgan – which offers exposure to the 10-Year US dollar secured overnight financing rate (SOFR) ICE swap rate.