Deutsche Bank Launches Leveraged and Inverse Commodity Notes

April 29, 2008 

 

SAN DIEGO (ETFguide.com) - Regardless of whether you love or hate commodities, a new series of exchange-traded notes (ETNs) will give you an opportunity to sound your voice.

 

Deutsche Bank today announced that it will issue four ETNs linked to the Deutsche Bank Liquid Commodity Index and Deutsche Bank Liquid Commodity Index - Optimum Yield.  

 

The ETNs will be the first to offer long, short and leveraged exposure to a broad-based commodity index.

 

If you think commodity prices are inflated and due for a correction, then the DB Commodity Double Short ETN (Ticker:
DEE) might be for you. It offers
exposure to two times the monthly inverse performance of the benchmark
Deutsche Bank Liquid Commodity Index plus a monthly T-Bill index
return. Along the same lines, the DB Commodity Short ETN (Ticker: DDP)
attempts to deliver the monthly inverse performance of the same
commodity benchmark, but without leverage.

 

For
investors that are extremely bullish on commodities, the DB Commodity
Double Long ETN (Ticker: DYY) offers exposure to two times the monthly
performance of the Optimum Yield version of the Deutsche Bank Liquid
Commodity Index plus a monthly T-Bill index return. The DB Commodity
Long ETN (Ticker: DPU) offers exposure to the monthly performance of
the same Optimum Yield index plus the monthly T-Bill index return, but
without leverage.

 

"We
are thrilled with the on-going success of our commodity-linked
investment products and pleased to offer investors convenient access to
leveraged long and short commodity strategies,” said Kevin Rich,
Managing Director in Deutsche Bank's Global Markets Investment Products
group.

 

ETNs are debt securities that track their underlying index (minus fees) without tracking error.

A disadvantage is that as debt securities, investors absorb the credit risk of the issuer.

 

The
market price of an ETN isn’t just affected by the price of the
underlying index or security, but the credit quality of the issuer.
This is an important aspect to keep in mind as many financial
institutions have been hit hard by the recent credit crunch.

 

Investors
may trade ETNs at their market price or receive, at maturity or upon
early redemption, a cash payment from the issuer based on the
applicable index performance, less fees.

 

The
Deutsche Bank notes are senior unsecured debt obligations that charge
an annual fee of 0.75 percent and have 30-year maturities.

 

The
Deutsche Bank Liquid Commodity Index - Optimum Yield Excess Return
Index is composed of futures contracts on six commodities and weighted
as such: Light sweet crude oil (35%), Heating Oil (20%), Gold (10%),
Aluminum (12.5%), Corn (11.25%), and Wheat (11.25%). The PowerShares DB
Commodity Index Tracking Fund (Ticker: DBC) is the exchange-traded fund (ETF) version that follows this index.