MTNs storm ahead as new structures find favour
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MTNs storm ahead as new structures find favour

CMS growth is not expected to continue at its previous pace, but the momentum generated by the high first coupons, and the continuing leverage effort of MTN houses has kept demand for structured MTNs flowing.

Investor diversification is set to widen further in the coming months.

Last year proved a watershed for the EuroMTN market. A €50 billion boom in demand for CMS-linked structured notes from European retail and institutional investors drove a seismic shift from granular private placements into syndicate-sized jumbo trades. In addition, there was a swing to euros away from the market’s former reliance on appetite in Japan and the rest of Asia for yen and dollar structures.

“In 2005, dealers and structurers optimized their reach into client networks, retail intermediaries and institutions to create a liquid market for €100 million-plus and even benchmark-sized structured notes,” says Mike Tims, founder and CEO of mtn-i, a specialist information provider on the structured note market. More than $200 billion of structured MTN sales via 11,000 transactions in 10 different asset classes, were recorded by mtn-i in 2005.


Hunger for yield also drove new demand for high-coupon currencies and new currencies for international buyers such as the Icelandic króna and Mexican peso, a trend reflected in a surge of demand for core currency structures linked to emerging currencies such as the Brazilian real. A becalmed European yield curve suggests slower CMS sales in 2006, with structured investor attention expected to refocus on equities, commodities, FX and hybrid multi-asset class products.

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