Structured products tally for 2020 tops year ago by $20 billion; final number being tabulated

Chicago, Jan. 6 – With the final deals for 2020 still being added to the annual tally, the structured products market is up $20 billion for the year, in comparison to 2019, according to data compiled by Prospect News.

The numbers will continue to accumulate likely for another week to two. However, even with the final push of December issuance outstanding, issuers have worked on a resounding $75.98 billion of issuance, including exchange-traded notes.

Excluding ETNs, issuance for the year stands at $69.11 billion, in either case – with or without ETNs – 2020 was the largest year on record since Prospect News started collecting data in this market in 2004.

Equities

The Dow Jones industrial average hit a high of 31,000 on Wednesday, even as the U.S. Capitol was breached by protestors.

Equities have continued to outperform in the face of rising unemployment, a global pandemic and the U.S. Elections in November.

Structured products have responded to the rise in stocks and no real market correction as of yet, in the face of mounting odds, with 89.49% of structured products being tied to equities in one form or another in the past 12 months.

A full 65.16% of new issues have been tied to at least one equity index, 17.79% have been tied to a single stock and 6.54% have been linked to the performance of two or more stocks.

Just over 90% of structured products were tied to equities in 2019; however, the dollar amount of deals ran far ahead with $61.85 billion of issuance linked to stocks in some form, versus $48.01 billion the year prior.

Structures

Reverse convertibles, deals with the payout tied to a coupon rather than a payout at maturity, were popular during the year.

Over half of the deals to price in 2020 had some sort of foundation in this structure and nearly all of them have some sort of call feature.

Alternatively, the percentage of deals to price with some sort of leverage at maturity declined. Only 25.54% of the deals to price during the previous year had this sort of structure. In 2019, that percentage was closer to 33%.

Last week

Already, with many deals still being added each day as the market reconvenes after the holidays, the week of Dec. 27 has posted nearly $600 million of issuance. This figure will certainly be revised upward in the next week.

A revised total for the week of Dec. 20 is now available with $577 million from 215 deals, a total that is firming but not altogether solid.

League tables

Midmonth league tables will run for the full year. As it stands now, Bank of America is listed as agent on 13.26% of the deals to price in 2020, or $9.17 billion of issuance.

JPMorgan is in second place with 10.63% of the market stemming from 3,587 transactions amounting to $7.35 billion.

And, Citigroup is in third with $4.93 billion from 2,009 new issues.

In terms of issuers, Barclays is at the top with $9.32 billion from 1,904 deals.

Morgan Stanley Finance LLC is second in that table with $8.02 billion.

And, GS Finance Corp. is in third with $7.67 billion.

Citigroup and JPMorgan are in similar positions with $7.27 billion and $7.11 billion, respectively.

Deals of the week

UBS AG, London Branch brought a $49.1 million trigger autocallable contingent yield deal tied to Apple Inc. on Dec. 29, just under the wire for 2020 credit.

The bank priced the notes with a quarterly 8% contingent coupon based on a 58.5% coupon barrier.

The notes feature an autocall after six months if the stock closes above its initial level on any quarterly observation date.

And, the par-of-$10 notes have a hard barrier of 58.5% at maturity whereby investors will receive par. If the stock closes below the barrier, investors will fully participate in the decline of the stock.

The Cusip on the transaction is 90278R684.

Goldman Sachs announced that it had priced the second-largest deal of the week in a $36.17 million transaction of trigger autocallable contingent yield notes tied to the Russell 2000 index and the Nasdaq-100 index.

The notes pay a 6.04% quarterly contingent coupon if both indexes close above their 70% downside thresholds on a related observation date.

The notes will be called after six months if both indexes close above their initial levels.

Investors receive the full amount of the notes back at maturity if both indexes finish above 70% of their initial levels and the notes have not been automatically called.

Otherwise, investors fully participate in the losses of the worst performer.

Agents for the deal were UBS Financial Services Inc. and Goldman Sachs.

The Cusip is 36259U238.

In another single-stock transaction, Barclays sold $31.63 million of contingent autocallable notes tied to the stock of Tesla, Inc. on Dec. 30.

The notes pay a 21% contingent quarterly coupon if the stock closes above 60% of its initial level on a related observation date.

The notes can be called on any quarterly observation date, including the first one, at par of $10 if the stock finishes above its initial level.

And, investors receive par if the notes make it to maturity and finish above the 60% downside threshold, or share in the losses of the stock on a 1 to 1 basis if it does not finish above that level.

The Cusip number is 06747L389.

Morgan Stanley Wealth Management was the selected dealer and Barclays was listed as agent.

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