Citi has made its way to the list of top-selling products with the recent issue of Callable Floating Rate Notes. The product is linked to three-month USD Libor and sold $132m.
The three-month USD Libor interest rate is the average interest rate at which London banks are prepared to lend to one another in US dollars with a maturity of three months. Three-month Libor, which has been trending upwards after hitting a one-year low of 0.22285% in the beginning of May, currently stands at 0.2321%.
The 1.5 year income product offers a quarterly coupon equal to the Libor rate plus a spread of 0.3325%. Each coupon is subject to a minimum rate of 0% pa. Beginning on December 11, 2014 Citigroup has the right to redeem the notes. In the event of redemption by issuer or at maturity the investor would receive 100% of the principal amount of the notes plus any accrued and unpaid interest.
Year-to-date sales for Citigroup stand at $517m across 93 products. Last year the bank brought in $1.5bn in sales across 234 products. Libor has been used as an underlying 31 times so far this year, bringing in $569m, a major fall from last year’s $5.1bn across 202 products.
SRP data shows that there are more than 4,000 products linked to the Libor index across jurisdictions with Switzerland being the country with the highest number of Libor-linked structures (over 1,700 products) followed by the US (over 1,200 products), Taiwan (484 products), Germany (277 products) and Japan (202 products).
Issuance of structured products linked to Libor has declined in numbers compared with previous years following the rate manipulation scandal uncovered in 2012 which rocked the world after it was revealed that big international banks had long been manipulating the interbank interest rate gauge.
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