New Investment Ideas

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3Y USD, 100% KG on USD CMS Spread 10Y-2Y, 2.50% p.a. guaranteed, 3.20x leveraged

The difference between the yield on the benchmark 10-year and 2-year Treasury note recently inverted amid the trade war and growth concerns (yield spread is seen by many investors as a tool to forecast the probability of future recessions and rebounds). The spread 10Y-2Y hit its lowest level since 1989 when it was at -0.59%

The below strategy allows qualified investors to benefit from a fixed coupon over a short period whatever happens to the spread. To optimise the results of the floating leveraged coupon, the spread should go back to positive level after this short period. Investors' fear of an economic downturn is growing, Fed is under pressure to restore confidence by cutting interest rates. Such a move could restore confidence over a year as seen in 1989 and 2000, helping the 10Y-2Y spread to widen again. Qualified investors having such a view could optimise this strategy with a 1-year fixed coupon and a floating leveraged coupon thereafter

In 2007 the Fed ignored the inversion’s warning. Qualified investors having more concerns about the ability of the Fed to respond to this recent move could consider this strategy with a 2-year fixed coupon and a floating leveraged coupon thereafter. The below strategy allows qualified investors to benefit from a 2.50% p.a. guaranteed coupon paid quarterly over the 1st year, then a floating leveraged coupon of 3.20x annualized on USD CMS Spread 10Y-2Y paid quarterly (floored at 0%, without cap). This product is 100% capital guaranteed at maturity

Product Parameters

Issuer rating AA- (rated by S&P)
Currency USD
Maturity 3 Years
Exposure : USD CMS Spread 10Y-2Y(Ref: -0.0921%)
Frequency: Quarterly
Guaranteed Coupon (Q1-Q4): 2.50% p.a. over the 1st year
Coupon leveraged (Q5-Q12): 3.20 * USD CMS Spread (quarterly fixing in advance, floor 0%, no cap, 30/360)
At maturity: 100% capital guaranteed
Pricing date: 14/08/2019
Investor Profile: Bullish/Neutral sophisticated

Mechanism

In any case qualified investors will get a 2.50% p.a. guaranteed coupon over the first year, paid quarterly

Scenario 1:On Q5, USD CMS Spread 10Y-2Y is at +0.70%
Payoff: Qualified investors get 0.56% coupon (3.20 * 0.70% p.a.). Product continues

Scenario 2: On Q8, USD CMS Spread 10Y-2Y is at -0.20%
Payoff: No coupon paid. Product continues

Scenario 3: At maturity, USD CMS Spread 10Y-2Y is at +1.50%
Payoff: Qualified investors get 100% capital back + 1.20% coupon (3.20 * 1.50% p.a.). Final return = 100% capital back + 1.20% p.a. guaranteed coupon + Leveraged coupons paid quarterly over the last 2 years

Scenario 4: At maturity, USD CMS Spread 10Y-2Y is at -0.05%
Payoff: Qualified investors get 100% capital back, no coupon paid. Final return = 100% capital back + 2.50% p.a. guaranteed coupon + Leveraged coupons paid quarterly over the last 2 years

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

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3mth USD, 3.00x Leveraged Certificates

Leveraged Certificates allow qualified investors to either invest in markets with a directional view (without the effect of volatility and time value) or hedge a particular position

Investment idea: Bullish Leveraged Certificate on the CBOE S&P500 Volatility Index (VIX Sept19). The CBOE S&P 500 Volatility Index is based on real-time prices of options on the S&P 500 Index, listed on the Chicago Board Options Exchange, and is designed to reflect investors' consensus view of future (30-day) expected stock market volatility.

In a time of growth concerns, volatility tends to increase. Regarding the future outlook of global economics, qualified investors may think that the uncertainty will increase: outcome of the trade war, Brexit, inverted yield curve are such events will allow the VIX to increase over the next months. Qualified investors could wait until the VIX goes back to its average of 15.15 (over the 5 past years) or below to benefit from a good entry point

Product Parameters

Issuer rating A2 (rated by S&P)
Currency USD
Maturity 3 Months
Pricing Date: 16/08/2019
Investor Profile: Neutral sophisticated

Mechanism

Positive scenario: VIX Sept19 increased by 10% (USD 21.49). Value of the Certificate is now USD 8.3900 (+28.85%)


Neutral scenario: VIX Sept19 remain unchanged (USD 19.54). Value of the Certificate is still USD 6.5117 (+0.00%)


Negative scenario: VIX Sept19 decreased by 10% (USD 17.58). Value of the Certificate is now USD 4.4900 (-31.05%)


See below Leveraged Certificates on other underlyings:

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5Y USD, CLN on Republic of Italy, 4.05% p.a. guaranteed

Matteo Salvini, Deputy Prime Minister of Italy intended to recall parliament from its summer break for a vote of no confidence. As a result, the Italian debt was under pressure. The 5-year Italian CDS Spread yield increased by 12.93% on the 09th of August (+28% from the 1st of August). The Senate opted to calm the political turmoil by rescheduling the no confidence vote to the 20th of August 2019 in response to the crisis facing the government: Prime Minister Conte may choose to resign if he loses the no confidence vote.

This strategy is suitable for qualified investors willing to benefit from the current high level of the Italian CDS. For the others, waiting for the 20th August, depending on the outcome of the vote, could allow another spike in Italian 5Y Spread and allow qualified invertors to benefit from another good entry point.

Note that Italy avoided a credit downgrade from Fitch Ratings and maintained its rating BBB

This strategy allows qualified investors to benefit from a 4.05% p.a. guaranteed coupon unless credit event, paid quarterly and offers exposure to the creditworthiness of Republic of Italy. Capital is guaranteed if no credit event occurs (such as bankruptcy, obligation default, failure to pay and restructuring)

Product Parameters

Issuer rating A(rated by S&P)
Currency USD
Maturity 5 Years
Exposure: Republic of Italy (BBB, rated by S&P)(ITALY CDS USD SR 5Y D14, i.e. 217.635)
Coupon Payment: Quarterly
Guaranteed Coupon: 4.05% p.a., 30/360, up to credit event
Market Recovery: Floating (determined by ISDA)
Pricing Date: 09/08/2019
Investor Profile: Neutral sophisticated

Mechanism

Scenario 1: In Y2, no credit event occurred
Payoff: Qualified investors get 4.05% coupon. Investment continues

Scenario 2: At maturity, no credit event occurred
Payoff: Qualified investors get 100% capital back + 4.05% coupon = 104.05%

Scenario 3: At maturity, a credit event occurred
Payoff: Market recovery determined by ISDA. No coupon paid

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 spread between underlyings over the last 5 years:

as3

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New Investment Ideas

There are three new notes for you:


10Y USD, Autocall Lookback WO on Indices, 6.70% p.a. recall, 3.50% p.a. conditional

European Central Bank’s recent meeting has led to a stimulative signal rate cut and the restart of bond purchases for the future, aiming to support confidence in an economy which still struggling with disappointing economics data. Stocks markets in Europe have just recovered their last year’ losses and still have appetite for gains. That is why the strategy is based on a European index: SX5E (1Y perf = -0.55%) and a French index: CAC 40 (1Y perf = +1.07%), one of the leader indices in Europe this year (YTD +14.52%), supported by strong earnings and new investments (+1.2% in Q2 against +0.7% in Q1)

This 10-year strategy allows qualified investors to benefit from an annual conditional coupon of 3.50% p.a. if the Worst off (WO) is above the 75% coupon trigger at each annual observation date. The strategy offers an optimisation of the strike thanks to a lookback-min effect during the first 3 months. It offers annual exits if the WO is above the autocall trigger and a 6.70% p.a. (Max payout 67%) recall coupon (memory) if the product is early redeemed. The autocall trigger is decreasing at maturity at 75% to increase the probability of benefitting from the recall coupon. This strategy also offers qualified investors conditional capital protection up to 45% on the downside at maturity (55% European barrier on the least performing index)

Lookback: The strike used for the product’s life is the lowest level of the underlyings recorded during the Lookback observations

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency USD
Maturity 10 Years unless called
Exposure (WO): Eurostoxx 50 (SX5E),CAC 40 (CAC)
Frequency: Annually
Lookback Observations: 3 observations over the 3 first months
Autocall Triggers: Y1-9 102%, Y10 75%
Recall Coupon: 6.70% p.a. (memory), Max payout = 67%
Coupon Trigger: 75%
Conditional Coupon: 3.50% p.a.
European Barrier: 55%
Pricing Date: 01/08/2019
Investor Profile: Neutral/bullish sophisticated
Alternative: Same parameters, Recall Coupon 4.50% p.a.(memory) + Conditional Coupon 4.50% p.a. (no memory)

Mechanism

Indices’ levels will be observed on the Initial Strike Date, Lookback Observation Dates 1 and 2. The lowest point observed over the 3 Observation Dates will be the Strike Level

Scenario 1:On Y2, WO is up by 4% from its strike level (above 102% Autocall Trigger and 75% Coupon Trigger)
Payoff: Qualified investors get 100% capital back + 13.40% recall coupon (2 * 6.70% p.a.) + 3.50% coupon = 116.90%. Product early redeems

Scenario 2: On Y3, WO is down by 10% from its strike level (below 102% Autocall Trigger but above 75% Coupon Trigger)
Payoff: Qualified investors get 3.50% coupon. Product continues

Scenario 3: On Y4, WO is down by 40% from its strike level (below 102% Autocall Trigger and 75% Coupon Trigger)
Payoff: No coupon paid. Product continues

Scenario 4: At maturity, WO is down by 20% from its strike level (above 75% Autocall Trigger and 75% Coupon Trigger)
Payoff: Qualified investors get 100% capital back + 67% recall coupon (10 * 6.70% p.a.) + 3.50% coupon = 170.50%

Scenario 5: At maturity, WO is down by 40% from its strike level (below 75% Autocall Trigger and 75% Coupon Trigger but above 55% European Barrier)
Payoff: Qualified investors get 100% capital back. No coupon paid

Scenario 6: At maturity, WO is down by 60% from its strike level (below 55% European Barrier)
Payoff: Qualified investors get 40% capital back (100% - 60%). No coupon paid

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

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18M USD, 95% Capital Guaranteed Lookback Call on FTSE 250

Boris Johnson has been recently appointed as Prime Minister and intends to ensure a bold Brexit strategy with the EU, this could leadto a potential increase in uncertainty. There is currently no majority for no-deal neither in parliament nor amongst the electorate (anextension is still practicable)

This strategy offers an exposure to the FTSE 250 (the 250 most highly capitalized companies, outside of the FTSE 100, traded on theLondon Stock Exchange)

This strategy allows qualified investors to potentially capturing short-term instability of the FTSE 250 by capturing the loweststrike over 4 observation dates over the 4 first months (Lookback-Min effect). October 31st is captured in the observation dates toachieve the maximum benefit from the Lookback-Min Strike (following the 2016 Referendum, the FTSE 250 lost 7.2% in a singleday). At maturity, this product offers 95% capital guaranteed and offers the performance (capped at 22.50%) between the finallevel of FTSE 250 and the minimum level of FTSE 250 observed on the lookback observations

Lookback: The strike used for the product’s life is the lowest level of the underlying recorded during the Lookback observations

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 18 Months
Exposure: FTSE 250 (MCX Index)
Lookback Observations: 4 observations over the 4 first months
At maturity: 95% Capital guaranteed
Cap: 22.50%
Payoff: 95% + Min(22.50%; Max((Index Final - Minimum Strike)-1; 0%))
Pricing Date: 31/07/2019
Investor Profile: Bullish sophisticated

Mechanism

Scenario 1: At maturity, FTSE 250 is up by 20% from its strike level
Payoff: Qualified investors get 95% capital back + 20% participation = 115%

Scenario 2: At maturity, FTSE 250 is up by 30% from its strike level
Payoff: Qualified investors get 95% capital back + 22.50% (22.50% cap) = 117.50%

Scenario 3: At maturity, FTSE 250 is down by 10% from its strike level
Payoff: Qualified investors get 95% capital back. No participation

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

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1Y USD, Participation Spread Long Airbus / Short Boeing

The strategy is based on the spread between (long) Airbus and (short) Boeing (1Y spread performance: +16.07%

Boeing (YTD +5.29%) recently reported a massive 2nd quarter loss of $2.9 billion (its worst ever), the company also delivered 104 fewer airplanes to customers in the 2nd quarter compared to the same quarter last year. These results are the consequences of the aerospace giant’s flagship 737 Max jet remaining at the ground after two fatal crashes since mid-March

On the other hand, Airbus (YTD +44.57%) benefited from a positive competitive environment, the company recently reported a rise of its profit by 72% ($2.20 billion) and a 23% ($20.4 billion) increase in revenues for the 2nd quarter compared to the 1st one. Furthermore, Airbus captured 363 orders and commitments for commercial aircraft ahead of Boeing’s 282 at last Paris Air Show in June

The below 1-year strategy allows qualified investors to benefit from an exit at the end of the 1st semester and a 7.00% flat coupon if the spread is above 0%. If not redeemed early on semester 1 (S1), the product offers 200% of the performance differential between the long and short equities after 1 year. The capital is at risk if Boeing outperforms Airbus

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency USD
Maturity 1 Year unless called
Exposure (spread): Long Airbus (AIR FP)/Short Boeing (BA US)
Frequency: Semi-annually
Autocall Trigger on S1: 0% on the Spread
Recall coupon: 7.00% flat
Participation At maturity, on the spread
Upside Participation: 200% (uncapped)
Downside Participation: 100% (floored at 0%)
European Barrier: 0% on the Spread
Pricing Date: 31/07/2019
Investor Profile: Bullish/Neutral Speculative

Mechanism

Scenario 1: On S1, Airbus is up by 5% and Boeing is down by 3%, Spread is 8% (above 0% Autocall Trigger)
Payoff: Qualified investors get 100% capital back + 7.00% coupon = 107%. Product early redeems

Scenario 2: On S1, Airbus is down by 1% and Boeing is up by 2%, Spread is -3% (below 0% Autocall Trigger)
Payoff: Product continues

Scenario 3: At maturity, Airbus is up by 45% and Boeing is up 5%, Spread is 40% (above 0% European Barrier)
Payoff: Qualified investors get 100% capital back + 80% return (200% * 40%) = 180%

Scenario 4: At maturity, Airbus is up by 15% and Boeing is down by 5%, Spread is 20% (above 0% European Barrier)
Payoff: Qualified investors get 100% capital back + 40% return (200% * 20%) = 140%

Scenario 5: At maturity, Airbus is up by 10% and Boeing is up by 25%, Spread is -15% (below 0% European Barrier)
Payoff: Qualified investors get 85% capital back.

Scenario 6: At maturity, if Airbus is down by 30% and Boeing is up by 20%, Spread is -50% (below 0% European Barrier)
Payoff: Qualified investors get 50% capital back.

The following graph represents the spread between underlyings over the last 5 years:

aaa33

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2Y USD 103% KG Twin Win on SPX +/-12%

Following tensions over the international trade war and some sign of weaknesses in the US economy growth, the S&P 500 Index (SPX) recorded a loss of -5.84% in May (YTD +14.94%). Since the beginning of the year the SPX recorded 62.40% positive sessions vs 37.60% negative sessions

There is still uncertainty about the trend of the US equity markets going forward. The recent announcement of Fed rate cuts could lead to sustainable positive US equity markets. Still, some analysts are warning that we might encounter a market recession some time between Q4 2019 and Q1 2020. This strategy allows qualified investors to benefit from the absolute participation in both downside and upside in the index performance. The upper (+12%) and lower (-12%) barrier levels are observed only at maturity to determine the final payout. Regardless of the SPX's performance, qualified investor gets a minimum capital back of 103% after 2 years

This strategy has already been launched on the 24th of May (Strike price: 2,826.06), investors could either subscribe in the existing structure or define different parameters for a new launch

Product Parameters

Issuer rating A3 (rated by Moody's)
Currency USD
Maturity 2 Years
Exposition S&P 500 (SPX Index)
Capital protection 103%
Participation 100%
Barrier type European
Upper Knock-Out (KO) 112% at maturity
Lower Knock-Out (KO) 88% at maturity
Investor Profile Neutral sophisticated
Alternative 1 100% KG Twin-Win on SPX, European Barriers [124%, 76%]
Alternative 2 100% KG Twin-Win on SX5E, European Barriers [123%, 77%]
Alternative 3 100% KG Twin-Win on NDX, European Barriers [128%, 72%]

Mechanism

Scenario 1:At maturity, SPX is down by 10% (between the 112% Upper KO and 88% Lower KO)
Payoff: Qualified investors get 110% capital back

Scenario 2: At maturity, SPX is up by 11% (between the 112% Upper KO and 88% Lower KO)
Payoff: Qualified investors get 111% capital back

Scenario 3: At maturity, SPX is up by 1% (between the 112% Upper KO 112% and 88% Lower KO)
Payoff: Qualified investors get 103% capital back

Scenario 4: At maturity, SPX is up by 15% (above the 112% Upper KO)
Payoff: Qualified investors get 103% capital back

Scenario 5: At maturity, SPX is down by 20% (below the 88% Lower KO)
Payoff: Qualified investors get 103% capital back

The following graph represents the performance of the underlying over the last 5 years and the payoff at maturity:

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15M USD Athena on Brent, 7.60% p.a. memory

Brent has been under pressure last month (-10.65% in May) almost reverting to the Q4 2018 level, mainly due to the lower demand in oil. In addition to unplanned outages in refineries and fear that Iranian oil would come back to the market. Recently there was a decline on the forecast of unplanned outages. The next OPEC meeting in June may result in a continuation of production cuts until the end of the year. This could mean a slight recovery in Brent over next months

This 15-month strategy is suitable for qualified investors with a view Brent would not fall more than 40% (above the USD 37.88 level traded back in April 2016) over 15 months and could recover slightly. This strategy benefits from Brent's recent slight peak in volatility. It offers a cumulative coupon of 7.60% p.a. (maximum return = 9.50%), provides monthly exists if Brent persists with its downtrend and a conditional capital protected of 40% (European barrier) on the downside performance at maturity

If qualified investors would like to have a guaranteed return, an alternative is possible with a 7.25 % guaranteed coupon, the other parameters remain the same

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 15 Months
Exposition Brent (CO1 Comdty)
Observations Monthly
Autocall Triggers (from M3) Decreasing from 100% to 70% (-5% every two months)
Recall Rate 7.60% p.a. (memory)
European Barrier 60%
Investor Profile Neutral to slightly Bullish
Alternative 1 15M USD Autocall BRC, 7.25% p.a. guaranteed
Alternative 2 15M GBP Athena, European Barrier 65%, 6.40% p.a. memory
Alternative 3 15M EUR Athena, European Barrier 65%, 5.55% p.a. memory
Alternative 4 15M CHF Athena, European Barrier 65%, 5.15% p.a. memory

Mechanism

Scenario 1: In M5, Brent is down by 3% (above the 95% Autocall Trigger)
Payoff: Qualified investors get 100% capital back + 5 x 0.63% coupon (7.60% p.a.) = 103.15%. Product early redeems

Scenario 2: In M7, Brent is down by 12% (below the 90% Autocall Trigger)
Payoff: Product continues

Scenario 3: At maturity, Brent is down by 25% (above the 70% Autocall Trigger and the 60% European barrier)
Payoff: Qualified investors get 100% capital back + 15 x 0.63% coupon (7.60% p.a.) = 109.45%

Scenario 4: At maturity, Brent is down by 36% (below the 70% Autocall Trigger but above the 60% European barrier)
Payoff: Qualified investors get 100% capital back. No coupon paid

Scenario 5: At maturity, Brent is down by 45% (below the 60% European barrier)
Payoff: Qualified investors get 55% (100%- 45%) capital back. No coupon paid

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

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5Y USD Hybrid CLN on French Republic and Steepener USD 30-2Y Swap Rates

Spread 30Y – 2Y USD Rates Swap recovered from February 2018 level. Qualified investors who missed a good entry point in December 2018, but still interested in gaining exposure to long term USD rates with a belief in the rise in long-term interest rates, could consider the below strategy (hybrid product offering exposure on the spread 30-2 including a Sovereign Credit Default Swap (CDS) risk on French Republic)

The below strategy allows qualified investors to cash in 3.00% p.a. guaranteed coupon the first year. Over the following 4 years, qualified investors receive a conditional coupon paid as a result of 4.81 leverage on the spread 30-2Y USD Rates (based on forward yield curve it will be equivalent to 2.62% Y2, 2.15% Y3, 1.63% Y4, 1.15% Y5). Betting on a widening of the spread 30-2Y is a rather expensive strategy as the market is already pricing it

In order to offer attractive terms (yield and capital protection) we added an exposure to the French Republic CDS (AA rated by S&P) with a current 5Y CDS at 28.52 recovering from its historical average over the last year (30.06). Therefore, the strategy suggested is a Credit Linked Note (CLN) on French republic (market recovery and European settlement) paying returns linked to the spread 30-2Y USD Rates

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency USD
Maturity 5 Years
Credit Exposure French Republic (AA rated by S&P, FRANCE CDS USD SR 5Y D14 Corp, 28.52)
Rates Exposure USD 30-2Y Swap Rates (USSW30 - USSW2, 0.4160)
Observations Annually
Coupon Y1 3.00% p.a. guaranteed
Coupon Y2 to Y5 4.81 * max(0%, 30-2Y USD)
Coupon convention 30/360, Up to Credit event, Fixing in Arrears
Recovery Market Recovery
Settlement European
Investor Profile Bullish Sophisticated

Mechanism

Scenario 1: On Y1, no Credit event occurred
Payoff: Qualified investors get 3.00% guaranteed coupon

Scenario 2: On Y2, no Credit event occurred and spread USD 30-2Y Swap Rates is equal to 1.10
Payoff: Qualified investors get 4.81 * 1.10 = 5.29% coupon

Scenario 3: On Y3, no Credit event occurred and USD 30-2Y Swap Rates is equal to 0.42
Payoff: Qualified investors get 4.81 * 0.42 = 2.02% coupon

Scenario 4: On Y3, no Credit event occurred and USD 30-2Y Swap Rates is equal to -0.12
Payoff: No coupon paid (coupon floored at 0.00%)

Scenario 5: On Y4, a Credit event occurred and USD 30-2Y Swap Rates is equal to 0.68
Payoff: Market recovery determined by ISDA. No coupon paid

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 Credit and Rates exposures over the last 5 years:

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5Y USD Athena Airbag on US Stocks, 25.00% p.a. memory

The upcoming G20 meeting (28th and 29th of June) coupled with the uncertain outcome of US-China trade war, and a potential risk of global recession will hopefully lead to strong volatility in the coming months

This strategy offers an exposure on 5 US stocks showing a rather solid balance sheet with positive cash flows and quite a strong business model: Apple, HP, Microsoft, Micron and Walt Disney. Gaining an exposure on these selected 5 stocks are considered a good way to benefit from the expected moves by ideally cumulating a conditional 25.00% coupon p.a. (maximum payout = 125%) even in a negative market scenario

This 5-year strategy with semi-annual liquidities enables the qualified investor to exit the investment even if the stocks enter a bear trend thanks to descending autocall triggers (-5% every six months). This solution offers a potential cumulative return of 25.00% p.a. paid only if the strategy is early redeemed. The strategy also offers qualified investors a conditional capital protection up to 48% on the downside in 5 years (equivalent to 52% European barrier on the least performing stock) and maximise the coupon payment at maturity, thanks to an Airbag effect (the last autocall trigger is equal to the European Barrier)

This strategy has already been launched on the 18th of June (Strike price as below), investors could either subscribe in the existing structure or define different parameters for a new launch

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 5 Years unless called
Exposure (WO): Apple (APPL US, Strike 198.45); HP (HPQ US, Strike 20.52); Microsoft (MSFT US, Strike 135.16); Micron Technology (MU US, Strike 34.29); Walt Disney (DIS US, Strike 139.24)
Observations: Semi-annually
Autocall Triggers S1-S9: From 100% to 60% (-5% every semesters)
Last Autocall S10 (Airbag): 52%
Recall Coupon: 25.00% p.a. (memory), Max payout 125%
European Barrier: 52%
Investor Profile Neutral sophisticated
Status: Traded on the 18/06/2019

Mechanism

Scenario 1:On S4, WO is down by 12% from its initial level (above 85% Autocall Trigger)
Payoff: Qualified investors get 100% capital back + 4 * 12.50% coupon (25.00% p.a.). Final payout = 150%. Product early redeems

Scenario 2: On S8, WO is down by 32% from its initial level (below 65% Autocall Trigger)
Payoff: No coupon paid. Product continues

Scenario 3: At maturity, WO is down by 35% (above 52% Autocall Trigger and European Barrier)
Payoff: Qualified investors get 100% capital back + 10 * 12.50% coupon (25.00% p.a.). Final payout = 225%

Scenario 4: At maturity, WO is down by 55% (below above 52% Autocall Trigger and European Barrier)
Payoff: Qualified investors get 45% capital back. No coupon paid

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

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15M USD Bearish Autocall BRC BO on Tech Stocks, 18.75% p.a. guaranteed

Trump’s recent decision to impose tariffs on Mexico, with which it technically already had a deal in place, suggests that the trade war is here to stay. It is likely that even if a deal is reached with a country, it may not even hold. Nonetheless, American economic activity continues to be solid. If there is no news on US-China trade negotiations, macro data (retail sales, production, employment, etc.) will be important for the markets to gauge the “amplitude” of the slowdown in American growth

The strategy is based on a best of (BO) 3 stocks, whose level increased substantially since the end of Dec18: Twitter (+34.60%), Netflix (+58.12%) and Alibaba (+28.25%). According to forwards, the trend should not increase a lot: forward in 3 months are around +0.50% and +2.30% in 15 months

The below 15-month strategy allows qualified investors to benefit from a monthly 18.75% p.a. guaranteed coupon, monthly exits from M3 and a 150% conditional capital protection, observed at maturity on the best of the basket (to get 100% capital back, the best performance should not increase more than 50% at maturity from its initial value)

The BO version of the basket is for qualified investors with a bearish view on the Technology market in US and China. For qualified investors with a neutral-bullish view on those stocks, an alternative with a worst of (WO) basket could also pay 12.20% p.a. guaranteed with monthly exits from M3 and a conditional capital protection at 50% observed at maturity on the worst performance

Product Parameters

Issuer rating A3 (rated by Moody’s)
Currency USD
Maturity 15M unless called
Exposure (BO): Twitter (TWTR UN); Netflix (NFLX UQ); Alibaba (BABA UN)
Observations Monthly (from M3)
Autocall Triggers 100%
Guaranteed Coupon: 18.75% p.a.
European Barrier: 150%
Pricing Date: 21/06/2019
Investor Profile: Bearish Speculative
Alternative with opposite view: 15M USD Autocall BRC WO on US Tech Stocks, Monthly observations (from M3), Autocall Trigger 100%, European barrier 50%, 12.20% p.a. guaranteed

Mechanism

Scenario 1: On M3, BO is down by 10% from its initial level (below 100% Autocall trigger)
Payoff: Qualified investors get 100% capital back + 1.5625% coupon (18.75% p.a.). Final payout = 104.6875%. Product early redeems

Scenario 2: On M10, BO is up by 15% from its initial level (above 100% Autocall trigger)
Payoff: 1.5625% coupon paid (18.75% p.a.). Product continues

Scenario 3: At maturity, BO is up by 30% from its initial level (below 150% European barrier)
Payoff: 100% capital back + 1.5625% coupon (18.75% p.a.). Final payout = 123.4375%

Scenario 4: At maturity, BO is up by 55% from its initial level (above 150% European barrier)
Payoff: 45% capital back + 1.5625% coupon (18.75% p.a.). Final payout = 68.4375%

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

 gr21

1Y USD, LS 50% RC on USD 3 Month Libor, 10.50% p.a. guaranteed

The recent shift from the Fed over a more dovish outlook and an increased likelihood of global recession has led the term structure to invert in the shorter-end since the beginning of the year

Qualified investors expecting the USD 3-Month Libor ($3mL) to remain stable at current levels or potentially decrease moderately in one year could consider the enclosed strategy offering a rather attractive guaranteed return over a less volatile underlying when compared to equities

In one year, the capital is at risk if the $3mL closes 50% below its initial level (low strike 50% equivalent to 1.1746 - 1Y forward level is actually at 1.59). The annual guaranteed return is at 10.50% p.a. paid quarterly with a conditional capital protection thanks to a 50% leveraged put. If the underlying closes below 50%, then the investors receive a value of cash which would be less than initially invested (see below scenarios)

The below exposure was shown one month ago. Pricings are quite volatile and are subject to daily refresh

London Interbank Offered Rate is the average interest rate at which leading banks borrow funds from other banks in the London market. Often considered a benchmark, regulators have planned to discontinue the use of it in the coming years

Product Parameters

Issuer rating BBB+ (rated by S&P)
Currency USD
Maturity 1 Year
Exposure: USD 3 Month Libor (Spot: 2.3492)
Coupon Payment: Quarterly
Guaranteed Coupon: 10.50% p.a.
Leveraged Put: 50% (Strike 1.1746)
Pricing Date: 21/06/2019
Investor Profile: Neutral sophisticated
Alternative 1 6M USD, Leveraged Put 50%, 3.61% p.a. guaranteed
Alternative 2 1Y GBP, Leverage Put 50%, 10.28% p.a. guaranteed
Alternative 3 1Y EUR, Leveraged Put 50%, 9.10% p.a. guaranteed
Alternative 4 1Y CHF, Leverage Put 50%, 8.35% p.a. guaranteed

Mechanism

Scenario 1: At maturity, $3mL is up by 10% from its initial level (above 50% Leveraged put)
Payoff: Qualified investors get 100% capital back + 2.625% coupon (10.50% p.a.). Final payout = 110.50%

Scenario 2: At maturity, $3mL is down by 55% from its initial level (below 50% Leveraged put)
Payoff: Qualified investors get 90% (45%/50%) capital back + 2.625% coupon (10.50% p.a.). Final payout = 100.50%

Scenario 3: At maturity, $3mL is down by 80% from its initial level (below 50% Leveraged put)
Payoff: Qualified investors get 40% (20%/50%) capital back + 2.625% coupon (10.50% p.a.). Final payout = 50.50%

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

 gr21


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New Investment Ideas

There are three new notes for you:


3Y USD Athena decreasing on US Stocks, 16.00% p.a. memory

According to NY Times, both the United States and China seem to be digging into their positions in ways that will be hard to resolve with the kinds of mutual face-saving that typically turns high-stakes negotiations into deals. Nevertheless, media reported recently a commitment on both sides to solve the conflict. The actual political tensions create uncertainty in markets and allow qualified investors to benefit from potential drops

An escalation of the trade war has been and seems to be the main risk. Qualified investors might be interested by protecting themselves against a potential escalation of tension. As US markets gained after China reaffirmed commitment to resolve trade, we selected a basket of US consumer staples / solid stocks: Coca-Cola (+7.94% since the lows in Dec18), McDonalds (+16.14% since the lows in Dec18) and Apple (+25.90% since the lows in Dec18) to benefit from recent peak in volatility

The below strategy is a 3-year maximum duration providing quarterly exits with decreasing autocall triggers and a potential 16.00% p.a. memory coupon (max payout = 48%) paid if the product early redeems. At maturity qualified investors will benefit from a conditional capital protection (50% European Barrier on the lowest performer)

Product Parameters

Issuer rating A (rated by S&P)
Currency USD
Maturity 3 Years, unless called
Underlying (WO) Coca-Cola (KO US), Apple (APPL US), McDonalds (MCD US)
Observations Quarterly
Autocall triggers From 100% to 75% (-5% every 2 quarters)
Recall Coupon 16.00% p.a. (memory)
European barrier 50%
Alternative 1 - USD, Athena Airbag (last AC Trigger = EU KI = 50%), Recall Coupon 11.60% p.a. (memory)
Alternative 2 - GBP, Athena, Recall Coupon 13.30% p.a. (memory)
Alternative 3 - EUR, Athena, Recall Coupon 10.95% p.a. (memory)
Alternative 4 - CHF, Athena, Recall Coupon 10.40% p.a. (memory)

Mechanism

Scenario 1:On Q3, if not called before, WO is down by 2% from its initial level (above 95% AC Trigger)
Payoff: Qualified investors get 100% capital back + 3 * 4.00% coupon (16.00% p.a.) = 112%. Product early redeemed

Scenario 2: On Q8, if not called before, WO is down by 17% from its initial level (below 85% AC Trigger)
Payoff: No coupon paid. Product continues

Scenario 3: At maturity, if not called before, WO is down by 20% (above 75% AC Trigger and 50% European Barrier)
Payoff: Qualified investors get 100% capital back + 12 * 4.00% (16.00% p.a.) = 148%

Scenario 4: At maturity, if not called before, WO is down by 30% (below 75% AC Trigger but above 50% European Barrier)
Payoff: Qualified investors get 100% capital back. No coupon paid

Scenario 5: At maturity, if not called before, WO is down by 55% (below 75% AC Trigger and 50% European Barrier)
Payoff: Qualified investors get 45% capital back. No coupon paid

The following graph represents the performance of the 3 underlyings over the last 5 years

ma1

3Y USD 120% Participation on SX5E, 10.80% p.a.

Equities in Europe have been recovering since the beginning of the year with an ongoing tense geopolitical situation and the fear of global growth, market appreciation should run out of steam. The Euro Stoxx 50 Index (SX5E) increased by 19.65% from January to beginning of May. Since the beginning of the month, SX5E decreased by 5.50% and is now slowly recovering

The below strategy allows qualified investors to take advantage of the potential downtrend over the first year (with quarterly observation), with a 10.80% p.a. conditional coupon paid quarterly if SX5E trades quarterly below current level (entering a bearish trend). If such bear trend happens, we may expect a recovery in the index in 3 years. The strategy offers 1.20 times uncapped exposure in 3 years (at maturity) if the index closes above current level. The capital is also conditionally protected with a 70% European Barrier

Such strategy is suitable for qualified investors strongly believing European equity markets might suffer losses next year in that case will get rewarded with a quarterly coupon and if market recovers can be rewarded with an upside appreciating in 3 years

Product Parameters

Issuer rating A+ (rated by S&P)
Currency USD
Maturity 3 Years
Coupon Observations Quarterly (Q1, Q2, Q3, Q4)
Conditional Coupon 10.80% p.a.
Coupon Condition If closes below its initial level
Participation Observation At maturity (Y3)
Participation 120% on the positive performance
European barrier 70%
Investor Profile Bearish Speculative over 1Y, Bullish Speculative in 3Y
Alternative 5Y USD, 28.20% p.a. paid quarterly on the first year, 120% participation on the positive performance at maturity (Y5)

Mechanism

Scenario 1: On Q1, SX5E is down by 20% (below its initial level)
Payoff: Qualified investors get 2.70% coupon (10.80% p.a.), product continues

Scenario 2: On Q2, SX5E is up by 10% (above its initial level)
Payoff: No coupon paid, product continues

Scenario 3: At maturity, SX5E is up by 25% (above 70% European Barrier)
Payoff: Qualified investors get 100% capital back + 120% * 25% = 130%

Scenario 4: At maturity, SX5E is down by 15% (above 70% European Barrier)
Payoff: Qualified investors get 100% capital back. No participation

Scenario 5: At maturity, SX5E is down by 35% (below 70% European Barrier)
Payoff: Qualified investors get 65% capital back. No participation

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

ma2

5Y USD CLN on iTraxx Main [4-8], 7.20% p.a. guaranteed (*)

Recently, iTraxx spreads have widened (+19.73% in one month on the iTraxx Main 5Y). The iTraxx Main Index has just overtaken its 5-year historical average (average 66.76, actual spread 67.97)

According to Moody’s, European default rates are currently at their lowest levels since 2008, and although they are expecting a moderate increase in the default rate by the end of 2019, so far there have not been any recorded default this year. In the current market environment, there is potential to lock in these rising spreads by selling credit protection on the iTraxx Main index through a Credit Linked Note (CLN) Tranche

The below strategy exposes qualified investors to the Tranche [4 - 8] on iTraxx Main S31 and provides an exposure to the investment grade credit market

The product allows qualified investors to benefit from an annual coupon of 7.20% p.a. (paid quarterly) and a 100% capital redemption at maturity if the number of entities impacted by a Credit Event is less than 4. (*) If 4 or more Credit Events have occurred since the inception, the value of the coupon and the capital redemption will be reduced by 1.44% and 20.00% respectively for each Credit Event

It might still be too early stage to gain exposure to the iTraxx Main, as the spread decreased by 26.88% since the beginning of the year. Such trend can reverse, and timing could be optimized at a later stage to invest in this strategy

Product Parameters

Issuer rating A+
Currency USD
Maturity 5 Years
Underlying iTraxx Main S31
Tranche 2.40%-6.40% [4-8]
Coupon payment Quarterly
Guaranteed Coupon 7.20% p.a. unless credit event
Recovery Fixed at 0%
Settlement European
Investor Profile Sophisticated
If N Credit Events (N > 3): Coupon = Max[7.20% * [1 - (N - 3) / 5], 0%], Redemption = Max[100% - [1 - (N - 3) / 5)], 0%]

Mechanism

Scenario 1: On Q2, the Number of entities impacted by a Credit Event is equal to 0
Payoff: Qualified investors get 1.80% coupon (7.20% p.a.)

Scenario 2: On Q3, the Number of entities impacted by a Credit Event is equal to 3
Payoff: Qualified investors get 1.80% coupon (7.20% p.a.)

Scenario 3: On Q5, the Number of entities impacted by a Credit Event is equal to 4
Payoff: Qualified investors get 1.442% coupon (5.768% p.a.) and capital redemption at maturity is fixed at 80%

Scenario 4: At maturity, the Number of entities impacted by a Credit Event is equal to 3
Payoff: Qualified investors get 100% capital back + 1.80% coupon (2.70% p.a.)

Scenario 5: At maturity, the Number of entities impacted by a Credit Event is equal to 6
Payoff: Qualified investors get 40% capital back + 0.721% coupon (2.884% p.a.)

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 underlying over the last 5 years:

 gr21


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