Kiatnakin Phatra Bank (KKP) has launched an alternative financial product: the “USD Callable Fixed Coupon Note with Extra Return,” a structured note referencing the Secured Overnight Financing Rate (SOFR) in US dollars (USD).
This product aims to cater to investors seeking opportunities to lock in high long-term returns while ensuring 100% principal protection in foreign currency, amid the downtrend in US interest rates.
This product marks KKP’s first officially offered structured note referencing an interest rate (Interest Rate Linked Note), designed to diversify investment alternatives and address changing market conditions.
The USD Callable Fixed Coupon Note with Extra Return, linked to SOFR, is tailored for investors with an outlook on shifting interest rates and a desire to enhance returns above current USD deposit rates while enjoying full principal protection.
Key features of the product include:
- Principal protection: Return of full principal in USD at maturity or on the bank’s early redemption date.
- Fixed return and extra return opportunity: Investors receive a preset interest payment every six months for up to 10 years or until the bank exercises its call option.
- For the first 3 years (6 periods), investors earn a fixed rate of 5.25%. There is also an opportunity for additional returns if the SOFR is below 3.75% in the first year—a relatively high benchmark compared to current principal-protected USD investment products.
- After year 3 (periods 7-20), investors receive a fixed rate of 4.20%.
The US bond market is signaling an expectation that the Federal Reserve may begin cutting policy rates in the remainder of 2025, reflecting an economic slowdown. This represents a window for investors to consider investments that can lock in yields ahead of a potential interest rate decline in the market.
