Div Yields Reach Distressed Levels, But Investors Aren’t Biting Yet

The supply of dividend risk that originated during the selloff as a result of exotic desks re-hedging structured products has led to distress in the dividend futures market, said Davide Silvestrini, EMEA head of equity derivatives strategy at JPMorgan in London. Autocallable structures that banks had issued to clients over the past years experienced large increases in dividend risk as the market declined, forcing exotic desks to sell dividend futures to the market. This flow has been a contributing factor to the levels of distress in dividend expectations which Silvestrini said are by some metrics larger than what happened during the great financial crisis.