New Invest Ideas

Three new notes for you:

7Y USD TARN CLN 5.55% on Italy and CMS 30-2Y, 17% Target

The Credit Default Swap (CDS) of the Republic of Italy increased by 11.48% since the beginning of the year (it jumped to its highest level since 2013 in November 2018 - 302.165). The cost of insuring exposure to Italian government debt continued to surge since the new government is not reassuring for investors
The enclosed investmentstrategy offers a fixed guaranteed of 5.55% p.a. in years 1, 2 and 3 (total 16.65%) and isautocalled at 17.00% cumulative coupon from year 4 to 7. Qualified investors would be missing 35 bps (exposed to USD CMS 30-2Y). The issuer expects aduration of 4 to 5 years. Currently, the spread is at 18 bps and with a historic tendency to increase sharply in the coming 2-5 years, making it very likely to autocall on year 4
The investmentstrategy offers such an attractive yield because it has either incorporated acredit risk on Italy (ITALY CDS USD SR 7Y D14) and a rate risk on USD CMS 30-2Y This strategy is quite structured and is only suitable for qualified investors with a deep understanding of rates and credit risks

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity Max 7 Years, Min 4 Years
Underlying Republic of Italy (ITALY CDS USD SR 7Y D14), USD CMS 30-2Y
Republic of Italy Rating BBB (rated by S&P)
CDS Value (Pricing Date) 245 bds
Recovery Market recovery
Coupon Y1-Y3 5.55% p.a.
Coupon Y4-Y7 Max [0%; 200% x (USD CMS 30-2Y)], fixing in arrears
Target coupon 17% (product is autocalled when cumulative target coupon is paid)
Frequency Annually
Investor profile Sophisticated

Mechanism

Scenario 1: At the end of Y1, 2 and 3, no credit event occurred on Italy
Payoff: Qualified investors get 5.55% p.a. (30/360 basis, cumulative if no credit event: 16.65%)

Scenario 2: At the end of Y4, no credit event occurred and CMS 30-2Y spread is 0.752
Payoff: Qualified investors get Min[17% - 16.65%; 200% x 0.752] = 0.35% p.a. coupon (30/360 basis). Investment early redeems, qualified investors get 100% capital back

Scenario 3: At the end of Y5, investment not early redeemed, no credit event occurred and CMS 30-2Yspread is -0.152
Payoff: No coupon paid. Investment continues
Scenario 4: At the beginning of Y3, a credit event occurred on Italy
Payoff: Market recovery determined by ISDA. 5.50% p.a. coupon paid on Y1 & Y2, no further coupon payment and no autocall
Credit Event: If a credit event occurs, further coupons are forgone and the CLN will redeem at the final auction settlement price determined by International Swaps and Derivatives Association (ISDA: www.isda.org)

The following graph represents the performance of the CDS Italy 7Y over the last 5 years:

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1Y USD LS 85% RC on USD 3 Month Libor, 8.20% p.a. Guaranteed

The recent market selloff in US equities and slowdown in the FED hiking cycle has led the term structure to invert in the shorter-end. Qualified investors who believe $3mL will either remain range bound, or rise gradually could consider the enclosed investment strategy guarantee a return, while having conditional capital protection
Thisstrategy is suitable for qualified investors with a view on US rates over one-year horizon. The capital is at risk if the $ 3mL trades in one year below 2.278 (15% lower than current level). The annualguaranteed return is at 8.20% (current $3mL 2.68 but not guaranteed in the future) with conditional capital protection, thanks to a 85% low strike put (2.278)

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 1Y
Underlying USD 3m Libor (US0003M Index)
Spot 2,68
Low Strike (leverage put) 85% (strike: 2.278)
Floor 0%
Coupon 8.20% p.a. paid at maturity
Investor Profile Bearish Speculative
Alternatives Maturity: 3M, USD 5.15% p.a.; Maturity:12M, EUR 4.35% p.a.

Mechanism

Scenario 1: At maturity, $3mL fixed at 2.71 (+1.12% from initial level)
Payoff: Qualified investors get 100% capital back + 8.20% p.a. coupon = 108.20%

Scenario 2: At maturity, $3mL fixed at 2.30 (-14.18% from initial level)
Payoff: Qualified investors get 100% capital back + 8.20% p.a. coupon = 108.20%

Scenario 3: At maturity, $3mL fixed at 2.11 (-21.27% from initial level)
Payoff: Qualified investors get 83.20% capital back + 8.20% p.a. coupon = 91.40%

The following graph represents the performance of the underlying over the last 5 years:

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4Y USD LS 55% Phoenix memo on EM ETFs, 12.24% p.a.

Emerging markets are increasingly becoming economies that rely heavily on external trade and financing. Today, these economies seem better placed to weather negative shocks than they were in the past. For the most part, external debt ratios in emerging-market economies havestabilised since the onset of the global financial crisis, while current account deficits are less pronounced. Last year, most Emerging Markets' (EM) performances were negative (Brazil ETF -8.35%, Russia ETF -13.19%, India ETF -11.52%, China ETF -18.19%), creating an interesting entry point
Qualified investors might prefer to gain exposure to someEmerging markets equities ETFs via a structured solution offering semi-annual returns and exits. EM assets are usually more volatile than developed markets’ assets and so this could allow for morefavourable pricing of yield enhancements auto-callable solutions
Thisstrategy enables qualified investors to generate an annual income of 12.24% p.a.over 4 years (total potential returns 48.96%), if none of the ETFs on Brazil, Russia, India and China drops more than 25% every six months. The solution offers liquidity viadescending triggers mechanism to increase the possibility of an earlier redemption for the strategy. On the downside, the qualified investor is exposed to aLeveraged Strike Put on the WO (55%)

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity Max 4 Years, Min 6 Months
Underlyings (WO) Brazil ETF (EWZ UP); Russia ETF (RSX UP); India ETF (EPI UP; China ETF (FXI UP)
Frequency Semi-Annual
Autocall trigger 95%, 95%, 90%, 90%, 85% up to maturity
Coupon trigger 75%
Coupon 12.24% p.a. memory
Low strike 55%
Settlement Cash or Physical
Investor Profile Neutral Sophisticated
Alternatives 3Y, USD 11% p.a. coupon; 4Y, GBP 8.32% p.a. coupon; 4Y, EUR 6.78% p.a. coupon

Mechanism

A qualified investor invests USD 1M on this structure:

Scenario 1:
 At the end of S1, WO is down 10% (from its initial level and below 95% AC trigger)
Payoff: Qualified investor gets 12.24% p.a. coupon (USD 122.4k). Investment continues

Scenario 2: At the end of S3, WO is down 30% (from its initial level and below 90% AC trigger)
Payoff: No coupon paid, but memory effect

Scenario 3: At the end of S4, WO is up 15% (from its initial level and above 90% AC trigger)
Payoff: Qualified investors get 100% capital back + 12.24% p.a. coupon (+ any previous memory coupons) = 1,122.4k min. Product early redeems

Scenario 4: At maturity, WO is down 18% (from its initial level and above 55% leveraged put)
Payoff: Qualified investors get 100% capital back + 12.24% p.a. coupon (+ any previous memory coupons) = 1,122.4k min

Scenario 5: At maturity, WO is down 60% (from its initial level and below 55% leveraged put)
Payoff: Qualified investors get 72.73% capital back ((100-60) / 55) or the equivalent in physical (thanks to conversion ratio)

The following graph represents the performance of the 4 underlyings over the last 5 years and the products payoff:

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