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Corporate Yield Enhancement

CASE STUDY: YIELD ENHANCED DEPOSIT

You Are:

• Unhappy with the current low interest rate for Euro deposits (circa 2.0% p.a.).
• Currency conversion required, but not necessarily immediately.
• Unhappy with the current exchange rate for Euro conversion into Sterling (1.4352).

THE DUAL CURRENCY DEPOSIT

Why?

• It offers the opportunity to achieve a conversion level that is 6 cent better than the current market rate - 1.3727 as oppose to 1.4352.

And

• it offers a guaranteed interest yield above the current money market rate - 4.39%p.a. in this example. This equates to 43,900 per annum on a 1 million deposit.

 

Possible Outcomes for this strategy

• At all times you receive a guaranteed yield enhancement of 2.39% p.a. over and above the current money market rate.

And

• Should Sterling weaken to, or beyond the pre-specified exchange rate, then the deposit proceeds of principal plus interest will be returned in Sterling, converted at a significantly better rate than the current market (1.3727).

And

• Should the conversion rate for Euro/ Sterling remain above 1.3727, then the deposit proceeds of principal plus interest will be returned in the original Euro currency deposited.

 

Scenarios for you to consider

Worst Case - Should the rate for conversion of Euros into Sterling worsen, and at the end of the deposit term conversion into Sterling is essential, some of the Foreign Exchange loss will be absorbed by the enhanced interest received.

Best Case - Should the rate for conversion of Euros into Sterling improve, not only do you realise considerable foreign exchange profit, but also receives the enhanced interest rate.

Contact our UK Corporate Treasury Services team for more details on how we can benefit you.