Credit Agricole Lifts Sales of Ratchet Notes on Rate Speculation

Credit Agricole SA is increasing sales of structured notes that benefit when long-term interest rates increase.

France’s third-largest bank by market value sold $235 million of ratchet notes in September, lifting monthly issuance of the securities to the most since May 2011, according to data compiled by Bloomberg.

The notes pay returns based on moves in interest rate swaps, which jumped after Federal Reserve Chairman Ben S. Bernanke signaled in May that stimulus measures will be unwound. Investors receive 6 percent in the first year, then the coupon adjusts higher or lower the following year, depending on how the 10-year swap rate changes. Swaps measure the cost of exchanging fixed-rate interest payments for floating.

“This is a product designed to benefit from a steepening of the curve and is particularly appealing to private banks wishing to implement this view,” said Eric Etienne, the global head of non-linear trading at Credit Agricole in London.

The Paris-based bank’s $100 million of 10-year securities sold Sept. 19 were the largest ratchet notes issued this year, Bloomberg data show. Barclays Plc sold $30 million of 10-year notes on Oct. 1, the data show.

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