Deutsche Asset & Wealth Management said Thursday it is halting the creation of new shares in the PowerShares DB 3x Italian Treasury Bond Futures ETN (NYSEArca: ITLT) and the PowerShares DB Italian Treasury Bond Futures ETN (NYSEArca: ITLY). The creation halt is effective immediately.
Limited or halted creation ability for exchange traded notes can affect the notes’ intraday pricing and liquidity, which can lead to wide premium or discount deviations away from the notes’ net asset value. By paying a large premium on an ETN relative to the note’s intraday indicative value, investors could expose themselves to substantial losses.
“As disclosed in the pricing supplement relating to the ETNs, the market value of ETNs may be influenced by, among other things, the levels of supply and demand for the ETNs. It is possible that the suspension, as described above, may materially influence the market value and the liquidity of the ETNs. Deutsche AWM believes that the limitations on issuance and sale implemented may cause an imbalance of supply and demand in the secondary market for the ETNs, which may cause the ETNs to trade at a premium or discount in relation to their intraday indicative value,” according to a statement issued by Deutsche Asset & Wealth Management.
The German bank did not give a reason for halting creations ITLT and ITLY, but it did say it reserves “the right to resume issuing additional ETNs at any time, which might result in the reduction or elimination of any premium or discount in the trading price of the ETNs relative to their intraday indicative value.”
ITLT is a triple-leveraged play on the DB USD BTP Futures Index, “which is intended to measure the performance of a long position in Euro-BTP Futures,” according to PowerShares. ITLY is not leveraged. The two ETNs have been trading for three and a half years.