Leonteq has recently issued two innovative investment solutions on the SeDeX of the Italian Stock Exchange. It is a certificate Phoenix Autocallable and a Bonus Outperformance its ProShares UltraShort 20+ Year Treasury. The underlying is an ETF which aims to achieve a return equal to 2x the inverse of the performance of the ICE US Treasury 20+ Bond index. The two certificates are therefore short US Treasury 20+ Years, and therefore allow you to earn from a long-term Treasury rate hike.
The characteristics of the Phoenix Autocallable
The Phoenix Autocallable certificate on ProShares UltraShort 20+ Year Treasury is a product designed to face the unpredictable market situation. The fundamental element is the structure of the certificate which allows the investor great flexibility and resilience even in the event of further downturns that could occur on the markets both in the short and medium term.
The new certificate with ISIN CH1134499974 it has an issue price of € 1,000 per instrument, maturity of two years (12 October 2023), a conditional quarterly coupon of 2%, equal to an annual maximum of 8%, and a barrier of 75%. This last element, added to the fact that the barrier is European, therefore with an assessment of the value of the underlying for the purpose of returning the capital only at maturity, makes it a product designed to tackle even the phases of market weakness. Not only that, the coupon also enjoys the memory effect. This means that an unpaid coupon is not definitively lost but kept in memory: on subsequent observation dates, if the conditions giving right to payment are met, the previously unpaid coupons would be distributed together with that pertaining to that date of observation.
The product offers investors another advantage: autocallability. In practice, after the first six months, the certificate also allows the advance payment of the nominal capital (1,000 euros per instrument). In fact, for example, if on 5 April 2022 (first autocallability observation date) the official closing price of the underlying will be above the initial fixing level (autocall trigger level = 100% of the initial fixing level), then the certificate will be redeemed, paying the face value plus any coupons due. This system meets the investor, increasing the probability of repayment of the nominal capital.
The functioning of the Bonus Outperformance
The Bonus Outperformance certificate on ProShares UltraShort 20+ Year Treasury has an issue price of € 1,000 per instrument, maturity of two and a half years (April 12, 2024) and barrier of 80%. In this case, the product with ISIN CH1134499990 it does not distribute coupons during its life but offers the investor a participation directly proportional to any profits of the underlying index. The proportion on the upside is 150% and therefore more than proportional to any increases. The certificate also provides for a maximum limit of 150% on participation in the movements of the underlying financial asset (the so-called “Cap level”).
There are two possibilities for refunding the product. In the first case, if the final fixing is equal to or lower than the initial fixing multiplied by the bonus level (100%), the investor will receive an amount equal to the bonus amount (€ 1,000 per instrument). Otherwise, if the final fixing is higher than the initial fixing multiplied by the bonus level, the investor will receive the bonus amount plus an amount commensurate with the positive performance of the underlying index. This amount is equal to the issue price multiplied by the return on the underlying exceeding the bonus level and further multiplied by the participation.