Structured Note Sales Fall to 11-Year Low as Investors Watch Fed

Sales of structured notes fell to the lowest since 2002 in the third quarter in Europe and Asia amid investor concern they will miss out on higher market rates when the Federal Reserve withdraws stimulus.

Banks sold $11.86 billion of the securities that package debt with derivatives from July through September, the slowest quarter since the last three months of 2002, data compiled by Bloomberg show. Issuance in the U.S. was almost unchanged in the third quarter from the previous three months at $9.75 billion.

“Talk of tapering and potentially rising rates may have encouraged people to hold out for higher levels on structured notes before locking in current fixed rates,” said Kara Lemont, head of fixed-income structuring at BNP Paribas SA in London.

Demand slowed after Federal Reserve Chairman Ben S. Bernanke said in June the central bank would begin scaling back $85 billion dollars of monthly asset purchases this year, raising the specter of a rate rise. At the same time, those stimulus measures had eased banks’ funding needs, further depressing sales, particularly of notes tied to rate or inflation benchmarks, according to Benoit Petit, Societe Generale SA (GLE)’s deputy head of sales for Europe excluding France.

SocGen is among eight of this year’s 10 largest issuers posting a drop in sales in the last quarter. The second-biggest French bank issued $576.2 million of notes compared with a record $1.92 billion in April through June, according to data compiled by Bloomberg excluding notes where the amount of principal returned can vary.

DZ Bank AG sold $3.42 billion of notes in the third quarter, down from $6.76 billion the previous three months, the data show. Low interest rates prompted some investors to switch to bonds and other credit products, according to Matthias Wolf, DZ Bank’s head of structured rates in Frankfurt.

To contact the reporter on this story: Alastair Marsh in London at

To contact the editor responsible for this story: Shelley Smith at

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