SEB Unveils New G10 Currency Certificate Packaging Carry Trades

SEB AB is unveiling a new certificate allowing investors to bet on Group of 10 currencies.

The Stockholm-based bank, which released the details of its new certificate today, will offer investors the opportunity to buy five currencies backed by high interest rates through selling five G10 currencies where central banks have kept rates lower, it said in an e-mailed statement. The certificate, FX G10 Carry, will be listed on the Nasdaq OMX Stockholm exchange.

“Those who are willing to take more risk can also buy a carry certificate with leverage,” Louise Nylund, product manager for exchange-traded certificates at SEB, said in an e-mailed statement.

Exchange-traded certificates allow investors to bet on the future movements of an underlying asset such as currencies or precious metals. The certificates can also be used to bet on moves in stock indexes and commodities.

SEB has about 100 such products based on 25 underlying assets and plans to expand its offering in the area, it said. Other banks selling exchange-traded certificates to investors in Sweden include Commerzbank AG, Svenska Handelsbanken AB, Nordea Bank AB, Royal Bank of Scotland Group Plc, BNP Paribas SA, Societe Generale SA and Citigroup Inc.

Carry trades work best during stable economic conditions and when volatility is low, SEB said. JPMorgan Chase & Co.’s Global FX Volatility Index has jumped more than 40 percent this year, heading for its biggest half-year increase since soaring 91 percent in the final six months of 2008.

“It is not quite a carry market right now as market volatility is too high,” Nylund said. “However, if things stabilize as the global economic recovery continues and interest rates rise, conditions would look more attractive for a carry exposure.”

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