BNP Paribas said it has seen investor demand for a bearish European rates-linked note it structured last month increase in the wake of recent no votes on the European constitution. Kara Lemont, derivatives product structurer at BNP Paribas in London, said the note is timely because investors' sentiment on European interest rates has changed since France and Holland rejected the European constitution. "People are now more worried about rates going down than up," she said, adding the note has attracted a lot of interest on the continent.
The note, named Cristal, is a callable leveraged inverse floater with ratchets to lock-in gains. The note pays investors a fixed 6% coupon for the first year at quarterly dates. The coupon then goes up each year three-month EURIBOR rises at a slower rate than the forward curve predicts, for up to 10 years. The maximum coupon is capped at 10%.