Exploiting Japan's renegade repos
Last year's market declines pushed Nikkei forwards to eye-watering levels, wiping out implied dividend yields as repos dived below -100 basis points. Issuers that spotted the imbalance are now pushing structured trades that seek to profit from these disparities. Matt Cameron reports
Towards the end of 2008, the price of forwards (an over-the-counter contract agreed by two parties to buy or sell an asset at a specified point in the future) on the Nikkei 225 index began to spike sharply. The prices peaked in January 2009 at what one market participant describes as an "insane level". As Structured Products went to press, these prices were at least closer to established levels. But on October 10, a six-year forward trading at 97.96% (with the price expressed as a percentage of
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