Nomura Holdings Inc. plans to sell the first structured notes in six years tied to the Turkish lira and Japanese yen exchange rate, enabling investors to speculate on a recovery in emerging market currencies.
The lender is marketing 150 million yen ($1.5 million) of the notes that will be redeemed in lira at maturity, according to data compiled by Bloomberg. The five-year securities offer a fixed coupon for the first six months, then switch to floating payments that mirror the exchange rate, giving investors the opportunity to profit if the Turkish currency strengthens against the yen.
A stand-off between Turkish Prime Minister Recep Tayyip Erdogan and the judiciary put pressure on the lira in January, forcing the central bank to increase its benchmark rate to 10 percent from 4.5 percent in an emergency overnight meeting on Jan. 27. The lira dropped from 48.94 yen at the start of the year to 43.78 yen on Jan. 24, before the rate increase.
The currency traded at 46.32 yen at 8:25 a.m. in London, offering a “nice entry point for investors,” said Oliver Korber, a foreign-exchange derivatives strategist at Societe Generale SA. The trade enables investors to speculate “the situation on emerging markets is going to normalize in the long-term,” he said.
The lira historically gains when appetite for risk increases, while the yen is seen as a haven against market turmoil. The lira gained 31 percent against the yen from 2003 to 2007, peaking at 99.18 yen in October 2007, according to data compiled by Bloomberg.
Nomura is offering 100 million yen notes with an initial coupon of 5 percent along with 50 million yen of securities paying 4 percent and offered at 85 cents on the yen. Rebecca Daniel, a spokeswoman for Nomura in London, declined to comment on the notes.
Credit Suisse Group AG sold 6 million Turkish lira ($2.7 million) five-year notes tied to the exchange rate with the yen in October 2008. The notes offered a 20 percent coupon for the first year, then switched to replicate the exchange rate.