Morgan Stanleyis closing three of its structured products early due to oversubscription, saying changing market conditions are pushing up the cost of the underlying bonds and options.
The offer period for the Protected Growth Plan 51, Booster Plan 8 and Accelerator Bonus Plan 2 will now close on 25 October, instead of 29 October.
In a letter to clients, seen by Money Marketing, the firm says: “The continuing deterioration of the pricing environment means we will be closing three of our current plans slightly early due to over-subscription. Changing market conditions are adversely affecting pricing, meaning we are unable to add to the amount of capacity which we have already hedged.”
Morgan Stanley vice-president of the institutional equities division Nev Godley says: “Our five-year credit default swap spread is at a historic low, currently at 220 basis points. This means buying our own bonds is more expensive, which means there is less money to buy the option. There is a finite amount we hedge with our traders. If pricing moves against us, you get to the point where you lose money if you buy more bonds and options.”
Lowes Financial Management managing director Ian Lowes says: “As it gets more expensive, future structured products that are brought to market may look less competitive than existing ones.”