Goldman Sachs plans to issue four certificates of deposit linked to stocks as record low interest rates drive investor demand for the potentially higher-yielding CDs.
According to Bloomberg the structured CDs are the bank’s first and are set to price at the end of the month, said a person with knowledge of the offerings who declined to be identified because terms aren’t set. One four-year CD is linked to changes in the Dow Jones Industrial Average, with annual returns at a minimum of about 0.5 percent and a possible maximum of 24 percent, according to a preliminary sales document. That compares with the average yield of 1.15 percent for a three-year, fixed-rate deposit, Bankrate.com data show.
Demand for CDs tied to assets such as equities, commodities and exchange-traded funds has soared as the Federal Reserve has held its benchmark rate at zero to 0.25 percent since 2008. Bank revenue from the investments has more than tripled to $99 per million dollars in retail deposits in October from $30 in January, according to Kehrer-LIMRA Research compiled from approximately 30 lenders, including Wells Fargo & Co. and SunTrust Banks Inc.
The market-linked or structured CD market has had “healthy growth,” said Glenn Lotenberg, a managing director at Incapital LLC in Boca Raton, Florida, which expects to sell $2.5 billion of structured CDs this year, from $2 billion in 2010…..
Find out more at http://www.bloomberg.com/news/2011-12-09/goldman-sachs-is-said-to-start-offering-fdic-backed-cds-linked-to-equities.html
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