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Express Bonds

What are express bonds?

Express bonds offer an interesting coupon in sideways markets and the annual chance of early redemption at 100 % of the nominal amount. In addition, investors benefit from a risk buffer (=barrier). Express bonds are not capital guaranteed and investors bear the risk of the issuer.

Express bonds refer to an underlying, which is commonly an index or a stock. The term is usually several years. However, once a year there is the chance of a coupon payment and an early redemption at 100 % of the nominal amount.

How do express bonds work?

At the start of the term the strike price of the underlying is set. On the following annual valuation dates there is a check of the current price of the underlying. If the underlying is at or above the strike price on the valuation date, the express bond is redeemed early at 100 % of the nominal amount and interest is paid. If the underlying quotes below the strike price, the bond is not redeemed. Also, there is no interest payment. The following year the underlying price is again checked on the valuation date.

If there is no early redemption during the term, the barrier serves as additional risk buffer on the final valuation date. If the closing price of the underlying on the final valuation date is at or above the barrier, then the redemption is at 100 % of the nominal amount. In addition, missed coupons are paid. If the closing price of the underlying is below the barrier, there is no interest payment and redemption is according to the performance of the underlying. In this case, capital loss up to total loss of invested capital is possible.


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