Back to top

Analyst Blog

Zacks Equity Research

Citi & Morgan Stanley Issue $32.5M Notes

MS C JPM BAC

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

According to Bloomberg, Citigroup Inc. (C - Analyst Report) and Morgan Stanley (MS - Analyst Report) sold dual directional structured notes worth $32.5 million linked to Euro Stoxx 50 Index and Standard & Poor’s 500 Index, respectively. The gains from these notes are directly related to fluctuation in the benchmark of these indices.

Citigroup issued five-and-half-year notes worth $17.6 million, having an estimated initial value of 93.5 cents, on Dec 30. The notes have a yield rate of 1.3 times the gains of the Euro Stoxx 50 Index. On the other hand, Morgan Stanley sold six-year notes worth $14.9 million, having an estimated value of 94.7 cents on Dec 30. The securities yield 1.15 times the gains of the Standard & Poor’s 500 Index.

Further, both the notes provide investors an unleveraged absolute value of as much as 35% of losses of the respective indices. However, if the an index falls below the specified cap of 35%, investors will lose their entire capital.

Dual directional notes have gained popularity in recent times. Earlier, in 2012, JPMorgan Chase & Co. (JPM - Analyst Report) had issued similar securities based on the performance of the S&P 500 index, subject to a 15% cap and an 80.7% barrier. Banks issue such structured notes by packaging debt along with derivatives to investors, while earning fees and raising money at the same time.

The dual directional securities, also known as absolute return notes, are generally based on the possibility of returns in markets that are comparatively less volatile.  These notes are unique because investors get a positive return even if underlying asset decreases in value within a pre-specified range. However, investors will lose their whole capital if the benchmark falls below the barrier level.

Currently, Citigroup has a Zacks Rank #4 (Sell) and Morgan Stanley has a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Bank of America Corp. (BAC - Analyst Report) with a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%