Global Investment Grade Bond Notes — Quarterly Income

Investment Overview

This structured investment note is issued by an A-rated international financial institution and is linked to the performance of a diversified basket of global investment grade bonds. The note pays a quarterly income of 1.375% (equivalent to 5.5% per annum) on each quarterly observation date throughout the three-year term, provided the underlying bond basket remains within defined performance parameters. Capital is returned at maturity subject to the final value of the basket.

The note is designed for investors seeking regular income above prevailing deposit and money market rates, with exposure to the investment grade credit market rather than equity markets.

How the Note Works

Income structure: The note pays 1.375% of face value on each of the twelve quarterly observation dates during the three-year term (equivalent to 5.5% p.a.). Income is paid regardless of minor fluctuations in the basket value — the quarterly payment triggers unless the basket has fallen materially below its initial level (the income barrier, set at 80% of initial basket value). If the basket is below the income barrier on a quarterly observation date, income for that quarter is deferred until a subsequent observation date where the basket has recovered above the barrier (memory coupon feature).

Capital at maturity: At the end of the three-year term, capital is returned in full provided the bond basket has not fallen below 75% of its initial level. If the basket has declined below this capital barrier at maturity, the investor receives capital proportional to the basket's final performance. For example, if the basket is at 65% of its initial level at maturity, the investor receives 65% of their invested capital.

Basket composition: The reference basket consists of a diversified portfolio of approximately 30–40 investment grade bonds selected by the issuing bank's credit team, including US Treasury bonds (20–25%), European government bonds (20%), USD-denominated investment grade corporate bonds (30–35%), and EUR-denominated investment grade corporate bonds (20–25%). All component bonds are rated BBB- or above by at least one major rating agency at inclusion.

Why This Note in 2026?

Global investment grade bond yields returned to historically attractive levels from 2022 onwards following the global interest rate tightening cycle. As of 2026, the yield environment for investment grade credit — while moderating from the peaks of 2023 — remains materially above the near-zero rates of 2010–2021. This note packages that yield in a quarterly income structure with a defined three-year term.

For investors in jurisdictions with strong deposit guarantee schemes (such as the UK's FSCS up to £120,000 per institution), deposits offer capital certainty at lower income rates. This note offers a higher income rate but with capital linked to bond market performance and counterparty exposure to the issuing bank — a different risk profile that suits investors comfortable with these trade-offs.

The Investment Grade Bond Market

Investment grade bonds are issued by governments and companies with credit ratings of BBB-/Baa3 or above from S&P, Moody's, or Fitch. This rating threshold signals that the issuer has adequate capacity to meet its financial obligations — as distinguished from high-yield (sub-investment grade) bonds, which offer higher yields but carry materially greater default risk.

Historical default rates for investment grade corporate bonds are very low: the 10-year cumulative default rate for BBB-rated bonds has averaged approximately 4.5% historically (Moody's data), meaning that approximately 95.5% of bonds starting in BBB retain their principal over a decade. Government bonds issued by major economies have near-zero historical default rates.

The diversified basket structure of this note spreads exposure across 30–40 bonds — significantly reducing the impact of any single issuer event on the overall basket performance.

Counterparty: The Issuing Bank

The note is a senior unsecured obligation of the issuing bank, which holds an A rating from at least two major rating agencies as of the note's issuance date. The A rating reflects the bank's strong capital adequacy, diversified business model, and track record of meeting obligations to note holders across multiple market cycles.

Investors should be aware that, as an unsecured obligation, the note ranks alongside other senior unsecured creditors of the bank in the event of insolvency. In practice, the failure of an A-rated financial institution is a low-probability but non-zero risk, and one that cannot be fully mitigated by any structural feature of the note.

Risk Factors

Capital risk: Capital is not guaranteed. If the reference bond basket falls below 75% of its initial level by maturity, investors will receive less than their full capital back. A severe, sustained deterioration in global investment grade credit markets could cause material capital losses.

Income barrier: If the basket falls below 80% of its initial level on a quarterly observation date, income for that quarter is deferred. In a severe credit market stress scenario, income may be deferred across multiple quarters.

Counterparty risk: The note's payments depend on the issuing bank's ability to meet its obligations. An A-rated issuer carries materially lower counterparty risk than unrated or sub-investment-grade entities, but no bank is risk-free.

Interest rate risk: Rising interest rates typically cause bond prices to fall. If interest rates rise materially during the note's life, the reference basket value may decline, creating pressure on both income continuity and capital protection.

Liquidity risk: This note is not listed on an exchange. Secondary market exit prior to maturity is possible through the issuing bank's repurchase facility, but prices will reflect current market conditions and may be below the par value of the note.

Currency risk: The note is USD-denominated. Non-USD investors bear USD/home-currency exchange rate risk.

How to Enquire

Contact our investment team to receive the full term sheet, key information document, issuer prospectus supplement, and basket composition details for the current issuance. This note is available to sophisticated and high-net-worth investors. Minimum investment USD 50,000.

Important: Target return of 5.5% p.a. is conditional on the performance of the reference bond basket and is not guaranteed. Capital is at risk if the basket falls below the capital barrier at maturity. This note is not a deposit and is not covered by any deposit protection scheme. Independent financial advice should be sought before investing.