When you buy a structured debt security, you are lending money to the issuer and become a creditor. The potential return depends on the performance of an underlying security, such as an interest rate or a benchmark equity index.
An EMTN (Euro Medium Term Note) is a type of medium-term debt instrument issued in EUR and having a maturity of 1 to 10 years.
Structured debt securities may vary significantly in terms of capital protection and yield mechanisms. For some issues, your capital is not protected.
A callable step-up is a debt instrument that allows the issuer to increase the interest rate paid to investors at a predetermined date, known as a step-up date.
In other words, during the first (few) year(s) of the instrument’s life, the interest rate is fixed and predetermined. However, at the step-up date, the issuer will raise the interest rate, thus offering investors a growing yield.
The term "callable" means that the issuer also has the option to redeem the instrument at the step-up date. This option can be advantageous for the issuer if interest rates have fallen because the issuer can redeem the bond at a lower interest rate. In return, the investor receives an attractive interest rate.
Invested capital is repaid in full at the final maturity date or at the step-up date in the event of early redemption. (Capital protection)
