RBC Sells Largest Structured Note Linked to Rates in One Year

Royal Bank of Canada sold $200 million of three-year, fixed-to-floating rate securities, the largest U.S. structured note linked to interest rates in a year.

The note, issued Aug. 22, yields 0.935 percent interest for the first year, then pays 0.43 percent more than the three-month London interbank offered rate with a minimum payment of 0.55 percent, according to a prospectus filed with the U.S. Securities and Exchange Commission.

That’s the biggest structured note tied to rates since Morgan Stanley issued $200 million of four-year securities, also tied to Libor, on Aug. 26, 2011.

The sale gives RBC $370.9 million in rate-linked issuance this year, more than double the total for the same period in 2011. The largest Canadian bank by assets is the only issuer to increase sales of the notes in the U.S. this year, as the Federal Reserve keeps interest rates near historic lows for a fourth year.

RBC has the highest credit rating of the top ten U.S. structured note issuers. Morgan Stanley, whose rating was dropped to three levels above junk by Moody’s Investors Service on June 21, has sold 74 percent fewer rate-linked securities this year after issuing the most last year.

To contact the reporter on this story: Kevin Dugan in New York at kdugan4@bloomberg.net

To contact the editor responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net