Common equity took a hit today:
After two months in which even a 50-point move in the Dow Jones Industrial Average was reason for excitement, investors were shaken out of their slumber as central bankers signaled reluctance to extend stimulus and sent U.S. stocks to their worst week since February.
Damage was worst in the final session, when Boston Federal Reserve President Eric Rosengren warned against waiting too long to raise interest rates. Selling built after European Central Bank President Mario Draghi downplayed the need for more measures to boost growth a day earlier. When it was over, the S&P 500 Index was down 2.3 percent to 2,127.81 on the week, with Friday’s plunge wiping out a slight gain over the first three days.
Bonds did not escape the carnage:
Draghi’s reticence accelerated a selloff in bonds that extended from Europe to the U.S. and Japan, with longer-dated securities, which have been outperforming in recent months, being the hardest hit. While yields are still low compared with historical averages, they are quickly rising from records reached earlier this year, recalling the bond rout of 2015, which saw German 10-year yields climb more than a percentage point in less than two months.
The yield on German 30-year bonds climbed 10 basis points to 0.60 percent, adding to a nine-basis-point jump the previous day. The rate on similar-maturity U.S. securities rose seven basis points to 2.38 percent.
Chances of the Fed raising rates at the September meeting climbed to 38 percent, up 16 percentage points from Wednesday, according to fed funds futures.
The U.K. and Japan, two markets which have help drive the global bond rally this year, also saw losses. The yield on 10-year gilts rose to a one-month high of 0.84 percent and the Japanese 10-year yield, which has been below zero since March, climbed to minus 0.02 percent.
Quantitative Investing is now a strategy that over-promises:
Banks and investment funds are hiring quants — people with training in physics or higher mathematics — as market intervention by central banks make it difficult to post robust profits. Money managers including UBS, Credit Suisse Group AG and GAM Holding AG are betting that the strategies widely used by the hedge-fund industry will help convince clients spooked by market volatility to invest their money instead of keeping it in cash.
The bank decided to diversify and increase the number of offerings to clients because of low interest rates, Haefele said. As part of the strategy, it raised $471 million for an oncology fund earlier this year and hired a team led by Vinay Pande from hedge fund Brevan Howard Asset Management to focus on short-term investment strategies earlier this year.
UBS manages more than $1.5 billion through quant analysis, Andreas Kessler, a spokesman for the bank, said in an e-mail. The wealth management unit started its first directly quant-based offering last year, he said.
Clients who hand over investment decisions to Haefele and his team have on average earned more on their portfolio than those who make decisions themselves, he said. That’s because they may find themselves exposed to a market downturn and fail to reinvest when things improve, he said. The bank does not disclose client returns.
Investment returns are a chaotic system; you cannot predict future absolute returns. Relative returns can be predicted a little bit, provided the two comparators are closely related. But, since UBS does not disclose client returns they’ll be able to get away with any claims they want for a long time.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2867 % | 1,674.0 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2867 % | 3,058.1 |
| Floater | 4.91 % | 4.70 % | 88,118 | 15.95 | 4 | -0.2867 % | 1,762.4 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1030 % | 2,883.6 |
| SplitShare | 5.05 % | 4.54 % | 78,770 | 2.21 | 5 | -0.1030 % | 3,443.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1030 % | 2,686.8 |
| Perpetual-Premium | 5.50 % | 4.61 % | 71,195 | 1.99 | 12 | -0.0586 % | 2,675.1 |
| Perpetual-Discount | 5.12 % | 5.14 % | 99,985 | 14.96 | 26 | -0.0284 % | 2,906.6 |
| FixedReset | 4.99 % | 4.44 % | 148,604 | 6.98 | 90 | -0.2215 % | 2,033.7 |
| Deemed-Retractible | 5.01 % | 4.80 % | 116,630 | 3.24 | 32 | -0.1166 % | 2,804.0 |
| FloatingReset | 2.82 % | 3.96 % | 27,763 | 5.03 | 12 | -0.2135 % | 2,204.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.J | FloatingReset | -2.40 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.60 Bid-YTW : 11.19 % |
| PWF.PR.P | FixedReset | -1.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-09 Maturity Price : 13.15 Evaluated at bid price : 13.15 Bid-YTW : 4.44 % |
| MFC.PR.I | FixedReset | -1.36 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.65 Bid-YTW : 7.12 % |
| TD.PF.D | FixedReset | -1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-09 Maturity Price : 19.87 Evaluated at bid price : 19.87 Bid-YTW : 4.48 % |
| SLF.PR.H | FixedReset | -1.26 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.70 Bid-YTW : 9.40 % |
| MFC.PR.L | FixedReset | -1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.98 Bid-YTW : 7.92 % |
| MFC.PR.F | FixedReset | -1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.49 Bid-YTW : 10.59 % |
| MFC.PR.N | FixedReset | -1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.47 Bid-YTW : 7.68 % |
| FTS.PR.G | FixedReset | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-09 Maturity Price : 17.79 Evaluated at bid price : 17.79 Bid-YTW : 4.16 % |
| CCS.PR.C | Deemed-Retractible | 1.36 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.60 Bid-YTW : 5.23 % |
| IFC.PR.A | FixedReset | 1.72 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.38 Bid-YTW : 9.84 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.H | FixedReset | 662,052 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.44 Bid-YTW : 4.52 % |
| RY.PR.A | Deemed-Retractible | 153,178 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 4.51 % |
| TD.PF.G | FixedReset | 105,525 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.75 Bid-YTW : 3.99 % |
| TRP.PR.J | FixedReset | 91,616 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-31 Maturity Price : 25.00 Evaluated at bid price : 26.28 Bid-YTW : 4.35 % |
| W.PR.K | FixedReset | 89,924 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-01-15 Maturity Price : 25.00 Evaluated at bid price : 25.57 Bid-YTW : 4.90 % |
| TD.PF.A | FixedReset | 67,445 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-09 Maturity Price : 18.58 Evaluated at bid price : 18.58 Bid-YTW : 4.23 % |
| There were 21 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TD.PF.F | Perpetual-Discount | Quote: 25.34 – 25.78 Spot Rate : 0.4400 Average : 0.2778 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 26.16 – 26.52 Spot Rate : 0.3600 Average : 0.2511 YTW SCENARIO |
| HSE.PR.C | FixedReset | Quote: 19.26 – 19.65 Spot Rate : 0.3900 Average : 0.2837 YTW SCENARIO |
| PWF.PR.T | FixedReset | Quote: 19.80 – 20.16 Spot Rate : 0.3600 Average : 0.2689 YTW SCENARIO |
| RY.PR.Q | FixedReset | Quote: 26.41 – 26.63 Spot Rate : 0.2200 Average : 0.1294 YTW SCENARIO |
| HSE.PR.E | FixedReset | Quote: 20.90 – 21.20 Spot Rate : 0.3000 Average : 0.2104 YTW SCENARIO |