(New York)

A lot of investors are worried about the potential for an inverted yield curve, and not just because of what it could mean for markets and the economy. If you are holding long-term bonds that will be yielding less than shorter-term bonds, you are likely going to be incentivized to reshuffle your holdings. Accordingly, Citigroup has come out with a first of its kind product that allows retail investors to fully redeem the principal on their bonds if the yield curve inverts. According to Bloomberg the “30-year constant maturity swap rate can sink as much as 10 basis points below the two-year rate before holders start incurring losses”. Continuing, “The products pay a coupon and return full principal as long as the spread remains greater than that level”.

FINSUM: This seems a bit sophisticated for most retail investors, but it is definitely an interesting product and potentially a good one for hedging.