Barclays Capital is selling credit range-accrual notes linked to on-the-run iTraxx credit indices. The structure, which is capital protected, was first mooted by the firm in September to target investors such as private banking clients and insurance companies, said Heikki Monkkonen, managing director in structuring at Barclays in London. Speaking at the Congress, he estimated up to five dealers may now be marketing similar notes.
The coupons of the notes are based on the number of days spreads in a specific credit index, which refresh at every six-month roll, stay within set bounds. Maturities are between two and five years. "These notes allow investors to take a view on future spreads without taking principal risk," said Monkkonen. He also noted current steep forward credit curves are translating into attractive coupon payments and default risk is automatically cut every six months when the index rolls.
