Extendible Step-up Notes
An Extendible Step-up Note is a good alternative to conventional fixed income products because of its higher coupon rate. A higher coupon rate is offered as the issuer
has the option to extend the maturity of the note, but the maturity can only be extended on specified dates and for a specified time. If the maturity is extended, the investor will
receive a higher “step-up” coupon to offset the impact of rising interest rates. These notes are backed by high-quality issuers such as the major banks and provide full principal protection if held to maturity, similar to traditional bonds.
Investor Rationale: Extendible Step-up Notes yield higher returns than comparable bonds.
Investor Profile: Clients should be flexible in terms of when they will be receiving their principal repayment, since the maturity date of the note can be extended for a certain period. If you are flexible and seeking both higher returns than those offered by conventional fixed income products, and a steady income stream, Extendible Step-Up Notes can be an attractive addition to your portfolio.
- Higher coupon rate
- Backed by high-quality issuers
- Simple structure
- 100% Principal Protection if held to maturity
- Liquidity in daily secondary market subject to availability
- Reinvestment Risk
- Price Risk
- Credit Risk of issuer