Structured Notes Need Fed as Stocks Drive Yields

Structured-note investors in the U.S. are more dependent than ever on stimulus from the Federal Reserve as securities tied to stocks are poised to make up the highest percentage of sales in at least four years.

Banks this year have sold $26.2 billion of securities, including reverse convertibles, that mimic the gains and losses of equities, according to data compiled by Bloomberg. That’s about 79 percent of all structured-note issuance, the highest concentration since at least 2010. The securities often don’t protect all of a buyer’s principal, making them vulnerable to plunging markets.

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