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Bank of Montreal has priced and issued $1.73 million in Senior Medium-Term Notes, Series K, structured as autocallable barrier notes with contingent coupons linked to the NASDAQ-100 Index, Russell 2000 Index, and Dow Jones Industrial Average. These notes, maturing on July 28, 2031, were priced on July 23, 2026, and provide monthly contingent coupon payments of 0.7375% per month (approximately 8.85% annually) if the underlying indices remain above specified barrier thresholds. This issuance highlights the bank's ongoing commitment to offering structured products tailored for investors seeking customized equity exposure combined with downside protection features.
Key Points
- NYSE: WTIU
- Bank of Montreal issued $1.73 million in Senior Medium-Term Notes, Series K, featuring autocallable elements linked to NASDAQ-100, Russell 2000, and Dow Jones Industrial Average indices
- Pricing Date: July 23, 2026; Maturity Date: July 28, 2031; Contingent Interest Rate: 0.7375% monthly (8.85% annualized); Agent's Commission: 3.625%; Public Offering Price: 100%
- Notes automatically redeem if all three reference indices trade above their call levels on quarterly observation dates starting July 2027; principal repayment at maturity depends on trigger events tied to 70% barrier levels
Autocallable Notes Structure and Features
The structured notes link to three reference indices: NASDAQ-100 (initial level 28,454.81), Russell 2000 (initial level 2,940.163), and Dow Jones Industrial Average (initial level 51,711.65). Issued in minimum denominations of $1,000 and multiples thereof, the total principal amount is $1.73 million, offered at par value.
The autocallable feature is a critical aspect, allowing automatic redemption beginning July 23, 2027. On each quarterly call observation date (July, October, January, and April), if all three indices close above their respective call levels (set at 100% of initial levels), the notes are redeemed early. Investors then receive their principal plus any contingent coupon due, with no further payments thereafter. This mechanism means investors may not hold the notes until the July 2031 maturity if market conditions trigger early redemption.
Contingent Coupon Payment Mechanism
The notes offer a contingent coupon rate of 0.7375% per month (~8.85% annually), payable monthly on the 28th (or next business day) starting August 28, 2026. Coupons are paid only if the closing levels of all three indices on the coupon observation date (three trading days before payment) meet or exceed their coupon barrier levels, set at 75% of initial levels: 21,341.11 for NASDAQ-100, 2,205.122 for Russell 2000, and 38,783.74 for Dow Jones Industrial Average.
If any index closes below its coupon barrier on the observation date, the monthly coupon is not paid. The filing does not clarify if missed coupons accrue or are forfeited. Each payable monthly coupon equals $7.375 per $1,000 principal. This structure exposes investors to correlation risk, as all three indices must simultaneously stay above their coupon barriers for coupon payments.
Principal Repayment and Trigger Event Conditions at Maturity
If not redeemed early, principal repayment at maturity on July 28, 2031, depends on trigger events. A trigger event occurs if any index closes below its trigger level (70% of initial): 19,918.37 for NASDAQ-100, 2,058.114 for Russell 2000, and 36,198.16 for Dow Jones Industrial Average.
If no trigger event happens (all indices at or above 70% barrier), investors receive full principal ($1,000 per $1,000 held). If a trigger event occurs, principal loss is based on the worst-performing index’s decline. For each 1% drop from initial to final level in the least performing index, investors lose 1% of principal. The repayment formula is $1,000 plus ($1,000 × percentage change of the least performing index), potentially reducing principal to zero in extreme cases.
Offering Details, Pricing, and Agent Commission
Priced on July 23, 2026, with settlement on July 28, 2026, the offering was managed by BMO Capital Markets Corp. (BMOCM). The public offering price was 100% of par ($1,000 per $1,000 principal). Certain dealers sold notes to fee-based advisory accounts at prices between $963.75 and $1,000, foregoing some selling concessions. A referral fee up to 0.50% of principal was payable to select dealers.
Bank of Montreal’s agent commission was 3.625%, totaling $62,712.50 on the $1.73 million issuance. Net proceeds to the bank were $1,667,287.50 after commission. These amounts reflected market conditions at hedge establishment before pricing. The estimated initial note value was $947.19 per $1,000 principal on the filing date.
Credit Risk and Investor Considerations
All payments depend on Bank of Montreal’s creditworthiness. Investors are unsecured creditors of the bank, with no FDIC, Canada Deposit Insurance Corporation, or other governmental insurance backing. The notes do not represent direct investments in the underlying indices but are obligations linked to their performance.
The notes are unlisted, which may limit liquidity for investors seeking to sell before maturity or early redemption. Additional risk factors are detailed in the product supplement and prospectus documents.
Quarterly Call Observation and Redemption Schedule
Automatic redemption assessments occur quarterly starting July 23, 2027, on July, October, January, and April call observation dates. If all three indices close above their call levels (100% of initial levels), the notes redeem automatically. Redemption payment occurs on the contingent coupon payment date following the call observation date, returning principal plus any due coupon. After redemption, no further payments are made, terminating upside participation.
Investor Suitability and Risk Warnings
The notes suit investors seeking monthly contingent interest and potential principal return if indices exceed call levels on quarterly dates. Investors must accept early redemption risk, forfeiting further index gains beyond call levels, and principal loss risk at maturity if trigger events occur.
The notes do not guarantee principal return; losses depend on the weakest index’s performance. While monthly income is possible if coupon barriers hold, significant downside risk exists if markets decline substantially.
Regulatory and Listing Information
The notes are unlisted and were filed under Rule 424(b)(2) with a pricing supplement dated July 23, 2026, incorporating prospectus documents dated March 25, 2025. The registration number is 333-285508. The Securities and Exchange Commission and state securities commissions have not approved or disapproved the notes. The notes carry CUSIP 06376LPW0 and are Series K of Bank of Montreal’s Senior Medium-Term Notes. They are not convertible into Bank of Montreal common shares or affiliates’ shares under Canadian deposit insurance regulations.
Valuation and Market Pricing Considerations
The estimated initial value of $947.19 per $1,000 principal reflects intrinsic value below the 100% offering price, accounting for profit margins, distribution, and hedging costs. Market value will fluctuate based on index levels, volatility, interest rates, and time. Values will converge to expected payoffs near maturity or redemption dates.
Secondary market trading, if available, depends on real-time market conditions and demand. The filing does not provide details on liquidity or pricing for early exits.
