Barclays prices more iPath Dow Jones - UBS ETNs linked to commodities with agricultural focus

By Emma Trincal

New York, March 24 - Barclays Bank plc multiplied in March its sales of exchange-traded notes linked to a single commodity via several ETN add-ons tied to some Dow Jones - UBS commodity sub-indexes, according to data compiled by Prospect News.

Most of the recent additional notes reflected demand for commodities in the agricultural sector. The exception was an issue of notes tied to tin.

So far this month, the bank has brought to market $252.5 million in nine different additional issues of its 0% iPath Dow Jones - UBS ETNs linked to a specific commodities sector giving investors exposure to cotton, coffee, softs, agriculture and tin.

"In general, interest in commodities as an alternative asset class is growing more than ever and is visible in various sectors of the commodities space," Philippe Comer, head of Commodity Investor Structuring - Americas at Barclays Capital told Prospect News.

"We're seeing in particular a renewed interest in agriculture, softs and tin, which is why we've increased outstanding shares for those particular ETNs. We wanted to satisfy the increase in demand."

However, Comer said that investors are still buying commodity-linked notes linked to broad indexes.

"We still have a lot of inflows coming in diversified products," he said. "For instance, DJP, our iPath Dow Jones - UBS Commodity Index Total Return ETN, saw inflows surge by 9% in the past three months, or 38% annually. The number of shares, which tracks inflows better than dollar amounts, has gone up from 58 million on Dec. 31 to 63.5 million now."

Bets on agriculture

But among the sector plays, agriculture is one that has been growing the most as of late.

"More and more investors see upside potential in agricultural products. In January for instance, per the numbers tracked by our research, the sector with the largest inflow was agriculture with $2.6 billion. Precious metals, on the other hand, saw some outflows of $2.4 billion," Comer said.

March madness

In three different issues this month, Barclays priced a total of $87.5 million additional principal amount of its 0% iPath Dow Jones - UBS Cotton Subindex Total Return ETN due June 24, 2038, bringing the total issue size to $150 million.

Also in March alone, three different add-ons totaling $62.5 million brought the issue size of Barclays' 0% iPath Dow Jones - UBS Softs Subindex Total Return ETNs due June 24, 2038 to $125 million.

On Monday, Barclays sold another $37.5 million of 0% iPath Dow Jones - UBS Agriculture Subindex Total Return ETNs due Oct. 22, 2037. The additional notes brought the issue size to $287.5 million. The original $250 million of notes priced on Oct. 23, 2007, and this month's add-on was the first one in more than three years.

The bank also priced an additional $15 million of its 0% iPath Dow Jones - UBS Coffee Subindex Total Return ETNs due June 27, 2038. The issue size is now $50 million.

Finally, on Wednesday, Barclays priced an additional $50 million of its 0% iPath Dow Jones - UBS Tin Subindex Total Return ETNs due June 24, 2038, bringing the issue size to $175 million. The original $125 million of notes priced on June 28, 2008.

Comer would not comment on Barclays' potential plans to roll out new commodity sector specific ETNs. But he said, "We have a leading position in the ETN commodities space with 60% of the market share, and we intend to maintain it."

Japanese opportunity

For Matt Medeiros, president and chief executive officer at the Institute for Wealth Management, the recent commodity add-ons may offer a timely opportunity in the wake of the Japanese earthquake.

"Demand for agriculture commodities has definitely increased in the first quarter. It will slow on a quarter-over-quarter basis because of what happened in Japan," Medeiros said.

"Japan is a big importer of agricultural products, in particular corn, wheat and soybeans.

"But after this earthquake, where are you going to store these commodities? The Japanese in the next couple of quarters are not going to buy as much as they normally would. Demand for agriculture commodities will slow short term, but it's still a good play long term. It's not going away. People are still going to need food.

"People buying these products now are betting on Japan having to restock their inventories. They see the opportunity to get in at a relatively good price."

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