6-month RCN on Singapore 10Y Government Bond

What is an RCN?

• An RCN is a structured financial product that is essentially a bond coupled with a short put option.

Background

• Rates volatility is at historic highs, presenting opportunities for yield enhancement.
• Investors with neutral/bearish rates views can earn higher returns using structured product solutions like reverse convertibles versus cash deposits. Bond investors can also use reverse convertibles for short-term bond replacement and higher yield.

Product Idea

• Underlying: SG3261987691 (SIGB 3.375% 09/01/33)
• 6-month reverse convertible on Singapore 10Y government bonds
• Offers guaranteed 5.04% p.a. coupon, paid at maturity
• At maturity, receive 100% capital or underlying bond at strike price

Key Risks

• Potential loss of capital if underlying bond price falls significantly
• Maximum return limited to coupon amount
• Credit risk of issuer

Payoff Description

• Investor gets 5.04% p.a. fixed coupon regardless of underlying performance
• If bond price remains above strike at maturity, receive full redemption
• If bond price falls below strike, receive delivery of underlying bond

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