Société Generale (SG) issued a dual-tranche deal on the last day of last month that pays no interest along the way and instead rolls everything into a single payment, worth up to 90% of par, at redemption. The French bank’s final terms are not hard to read, but the pieces interlock in an unusual way. The bond can currently be bought below par.

The profile of the French bank’s cumulative callable bond

The two bonds share the same macro structure and differ only in the annual coupon rate and in the benchmark threshold level at maturity.

This analysis covers one of the two, the bond with ISIN XS3476528149, which carries the richer coupon but also the tighter barrier on the underlying at maturity. The security has an issue date of September 30, 2026 and a maximum (and natural) maturity on the same date in 2036. It is also callable as early as the end of year one, which could sharply shorten its effective income-earning life.

The call dates at the issuer’s discretion are September 30, 2027; October 2, 2028; October 1, 2029; September 30, 2030; September 30, 2031; September 30, 2032; September 30, 2033; October 2, 2034; and October 1, 2035. If the bond is called, the bank pays 100% of par (barring default), and the bondholder is left with reinvestment risk.

The minimum investment size is EUR 1,000. The reference market is EuroTLX, the multilateral trading facility run by Borsa Italiana, Italy’s stock exchange. Trading is on a “Tel Quel” basis (the quoted price already includes any accrued interest, which is not settled separately on top), and traded volumes are thin. The bond is denominated in euros, was issued at par and will be redeemed at the same value at maturity and/or on any call date.

The coupon structure of this cumulative corporate bond

The other distinguishing feature is the cumulative nature of the interest: SG pays no coupon for as long as the security is outstanding on EuroTLX. The single coupon is calculated at a gross rate of 9% for each year elapsed since issuance. The mechanism SG sets out splits into two specific scenarios:

  • if the bond is called (from year 1 to year 9), the French bank pays the accrued coupon. Take two examples and imagine the call takes place on October 1, 2029 or on September 30, 2032. In both cases the holder would receive a price equal to 100% of the nominal amount subscribed, plus a premium of 9% (net: 6.66%) multiplied by the number of years between issuance and the call. In our examples: 9.00% x 3Y = 27.00% gross in total in one case, and 9.00% x 6Y = 54.00% in the other;
  • if the SG Issuer Oc Ind Link Sep36 Call Eur reaches September 30, 2036, the interest is paid only if the underlying respects the barrier. The underlying is the Solactive BTP 10Y Annual Comp. 11am Yield (Bloomberg “SOITA10Y Index”), tracking the yield on BTPs (Italy’s 10-year government bonds), and the barrier is set at 6%. Only if the 10-year BTP yield (measured through the reference index five business days before maturity) is equal to or below the 6% barrier will the maxi coupon be paid. Otherwise, that is with the barrier value above 6%, nothing. In the “lucky” case, the final maxi coupon is 90% gross of the nominal value of the bond subscribed.

Effective yield on the Société Generale bond

A good three weeks after launch, its reference price on the Borsa Italiana website is 93.50. On SG’s portal, on the page dedicated to the product, the bid and ask prices are 94.44 and 95.44 respectively. The bid/ask spreads are decidedly wide, and generally much tighter on liquid issues.

At a price of 93.50 the annual effective yield to maturity would be around 7.37%, roughly 5.9% net. Assuming a purchase price of 94.5, the two figures fall to 7.25% and 5.75% respectively, again over the full 10 years.

These do not match the 9% nominal rate because the SG bond has a structure similar to a zero coupon. For cumulative bonds, one applies the effective rate of return formula at the various redemption dates. A euro of coupon paid today is worth more than a euro earned at a future date. The sooner the call comes, the higher the effective yield.

Take four hypotheses, with a purchase today at 94.50 and redemption at the end of year 1, 3, 7 and 10. The gross coupon at those respective dates would be 9%, 27%, 63% and 90%. The gross annual effective yields would be 15.3%, 10.3%, 8.1% and 7.25%.

A 90% one-off premium at maturity, contingent and bought below par

The bond has a twofold and undeniable strength: the current discounted price and the above-average effective yield to maturity compared with equivalent-maturity paper. The sooner the call comes, the stronger the profitability, without waiting 10 years. An early call would also free up capital ahead of time, perhaps for other trades.

There is no shortage of risks, one of them enormous, and that one is coupon risk. If the barrier were not respected at natural maturity, the 10-year wait would have proved decidedly loss-making. The capital would have earned nothing in interest until 2036, capital gains aside for post-issuance buyers only. Inflation would have eroded its purchasing power just as it does with idle cash in a checking account or savings passbook. The real return would be negative.

Liquidity and market risks are no less significant, given that cumulative securities are more volatile on the secondary market. Less than a month into its life, prices have already slipped well below par.

Editor’s note

This article was originally published in Italian on money.it by Stefano Vozza on October 25, 2026 as «Cedola unica a tasso annuo del 9% sul cumulative callable bond SG che prezza sui 95». It has been translated and adapted for an international audience by the Money.it International desk.