Wells Fargo plans CDs tied to CS Retiree Consumer Expenditure 5% index

By Angela McDaniels

Tacoma, Wash., March 8 – Wells Fargo Bank, NA plans to price 0% certificates of deposit due March 31, 2023 linked to the CS Retiree Consumer Expenditure 5% Blended Index Excess Return, according to a term sheet.

If the final index level is greater than the initial index level, the payout at maturity will be par plus 105% to 115% of the index return. The exact participation rate will be set at pricing. If the final index level is less than or equal to the initial index level, the payout will be par.

The index is a rules-based index that seeks to broadly mirror the overall consumer expenditure patterns of retirees in the United States. Using data from the Consumer Expenditure Survey published by the Department of Labor’s Bureau of Labor Statistics, the index assigns category weights by computing the percentage that each of the 14 CEX consumer spending categories represents of the total consumer expenditure of the age group classified as 65 years and older. These weights are applied to the index’s notional basket of seven equity indices (the "underlying constituent indexes") intended to represent the CEX spending categories to construct the base index. The base index is rebalanced each year to reflect the new annual CEX data made available to the public the same year. The index has exposure to the base index while also employing a mechanism that targets an annualized realized volatility of 5% by using a 20-day lookback period to adjust its level of participation in the base index daily.

The index incorporates the daily deduction of a fee of 0.50% per year and a daily notional cost of 0.02% applied to the effective change in notional exposures to the base index and referenced fixed income index, representing the notional cost of the daily rebalancing to adjust toward the target volatility of 5%.

The index is calculated on an excess return basis, so the return of its base index exposure is reduced by Libor plus 40 basis points.

Incapital LLC is the distributor.

The CDs will price March 28.

The Cusip number is 94986TXR3.

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