Newcastle Building Society has entered a swap to structure its first guaranteed mixed asset bond, which gives participation in interest rates, the FTSE 100 and the Halifax house price index. Leslie Pape, treasurer in Newcastle-Upon-Tyne, said this is the first time it has combined exposure to both equities and house prices.
In the swap, the firm pays a floating rate based on three-month LIBOR and receives an equally-weighted combination of a 5.5% fixed interest rate participation in the performance of the FTSE 100 and the Halifax HPI. The swap pays 75% of the upside of the two indices. Pape declined to comment on the exact floating rate it pays in the swap. The swap matches the five-and-a-half-year maturity of the bond. Abbey National Financial Products is the swap counterparty.