Deutsche Bank To Begin Trading Two Leveraged Treasury Bond ETNs Today (LBND, SBND)

Deutsche Bank is set to begin trading two leveraged exchange traded notes today. The new funds are the PowerShares DB 3x Short 25+ Year Treasury Bond Exchange Traded Note (SBND), and the PowerShares DB 3x Long 25+ Year Treasury Bond Exchange Traded Note (LBND). According to their marketing materials, these new funds are the first exchange traded products that provide investors with a cost effective and convenient way to take a leveraged long or short view on the performance of the CBOT Ultra T-Bond futures.

What are the securities and how do they work?

They are offering two separate Exchange Traded Notes. Investors can subscribe to either of the two offerings.

•   PowerShares DB 3x Short 25+ Year Treasury Bond Exchange Traded Notes due May 31, 2040 (“3x Short UST ETNs”)

•   PowerShares DB 3x Long 25+ Year Treasury Bond Exchange Traded Notes due May 31, 2040 (“3x Long UST ETNs”)
 
They refer to each Exchange Trade Note as a security. The securities will be issued in denominations of $25 and are senior unsecured obligations of Deutsche Bank, acting through its London branch.

Each security being offered has separate terms. For each security, investors will receive a cash payment at maturity or upon repurchase by Deutsche Bank AG, London Branch, if any, linked to the month-over-month performance of an underlying index which they refer to, in each case, as the Index, less an investor fee. The securities do not guarantee any return of principal at maturity and do not pay any interest.

What is the Index?

For the 3x Short UST ETNs, the Index is obtained by combining three times the returns, whether positive or negative, on the DB Short US Treasury Bond Futures Index (the “short Treasury futures index”) with the returns on the DB 3-Month T-Bill Index (the “TBill index”).

For the 3x Long UST ETNs, the Index is obtained by combining three times the returns, whether positive or negative, on the DB Long US Treasury Bond Futures Index (the “long Treasury futures index” and, together with the short Treasury futures index, “the Treasury futures indices” and each a “Treasury futures index”) with the returns on the T-Bill index.

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