HSBC, Rabobank plan certificates of deposit linked to index baskets

By Sheri Kasprzak

New York, June 5 - HSBC Bank USA NA and Rabobank, NA both announced plans Tuesday to price certificates of deposit linked to index baskets.

The HSBC CD is a Far East opportunity point-to-point certificate of deposit linked to equal weights of the Hong Kong Hang Seng China Enterprises, Morgan Stanley Capital International Taiwan, Morgan Stanley Capital International Singapore and Nikkei 225 indexes.

The payout at maturity will be par plus the basket return, subject to a floor of par.

The CDs are set to price June 25.

Index performance

The Hong Kong Hang Seng index has risen steadily since March, when it was trading between 19,000 and 19,500.

On Tuesday, the Hong Kong Hang Seng index gained 112.56 to end at 20,842.15.

The MSCI Taiwan index has made some gains over the past year. The index traded right around 250 this time last year, spiking at just over 280 in January of 2007. The index closed at 286.271 on Tuesday.

The MSCI Singapore index has made significant headway over the past year. In June 2006, the index traded around 2,500. On Tuesday, the index closed a 4,126.254.

In early March, the Nikkei 225 was trading just above 16,500. Now the index hovers just above the 18,000 mark.

On Tuesday, after another volatile session, the Nikkei 225 gained 80.39 to end at 18,053.81.

Rabo's CD

Rabobank also announced plans to price a principal-protected CD on Tuesday.

That CD is linked to equal weights of the Dow Jones Euro Stoxx 50, MSCI Singapore, S&P 500 and Nikkei 225 indexes.

The payout at maturity will be par plus the greater of 10% and the basket gain.

The five-year CDs are set to price on June 27.

Index performance

The Dow Jones Euro Stoxx 50 index had closed around 4,420 a month ago. The index now trades around 4,500 after dropping below 4,370 in late April.

On Tuesday, the Stoxx fell 24.63 to end at 4,513.18.

The S&P 500 traded around 1,500 a month ago. On Tuesday, the index fell 8.23 to end at 1,530.95.

Reverse convertibles

Reverse convertibles action Tuesday was led by a 20% offering of reverse exchangeables from JPMorgan Chase & Co. linked to the American Depositary shares of Elan Corp. plc.

Another reverse convertible offering with a large coupon came from HSBC USA Inc. That 18% note is linked to a basket of stocks.

"Twenty percent is a pretty good coupon but they've gone much higher than that," said one market source on Tuesday. "I think investors are hungry for yield these days. That's why we're seeing better coupons. I think we're reaching a point, though, where coupons are leveling off somewhat from what they were a few months ago."

The Elan-linked notes have a six-month term and a 20% protection level.

The notes pay par at maturity unless the stock closes below the protection level during the life of the notes and finishes below the initial share price.

If the notes should meet those qualifications, investors will receive a number of shares equal to $1,000 divided by the initial share price.

The notes are expected to price June 25.

HSBC's notes

The HSBC notes are linked to a basket of stocks that includes Elan; Evergreen Solar, Inc.; InterOil Corp.; Take Two Interactive Software, Inc.; and Zoltek Cos., Inc.

The notes have a 70% barrier and pay par at maturity unless any of the reference stocks falls below the barrier during the life of the notes and unless any of the reference stocks ends below the initial share price.

Should that occur, the notes pay a number of shares equal to $1,000 divided by the initial share price.

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