The Canadian Imperial Bank of Commerce (CIBC) has recently launched a five-year principal-at-risk structured note, Canadian Equity Return of Capital (ROC) Note Securities Series 1, with exposure to the S&P/TSX 60 Index. As reported by SRP, the index experienced a market 'bull run' in the last week of June and first few days of last week. Since then, the index has again fallen in price and traded at around 664.76 yesterday.
The five-year note offers a quarterly coupon of 1.5% as long as the index stays at a level at or above 70% of its starting level. Otherwise, no coupon is paid for that quarter.
At the end of the five years, provided that the level of the index is greater than or equal to 70% of its starting level, the product will pay capital in full in addition to 10% of any excess return above 30%.
Otherwise, capital is at risk one-to-one with the fall in the underlying, subject to a minimum return of 1%.
Canadian Equity Return of Capital (ROC) Note Securities Series 1 is available for subscription up until 13 July. The investment period begins on 18 July.
Reports suggest that buying sentiment was hit hard by last Friday's US jobs data report and affected the Toronto stock market this week, resulting in a decline in the S&P/TSX 60 Index. It is also suggested that the International Monetary Fund's announcement that it will be downgrading its economic forecast was another cause for the Canadian stock market fall this week.
The S&P/TSX 60 Index comprises the 60 largest companies on the Toronto Stock Exchange as measured by market capitalisation.