AQS Performance and Perspective - July, 2017


AQS| Asset Management for Insurers




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Client 9


Managed portfolio metrics updated monthly.

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Corporate Issuance 12 months


 Corporate Issues July

Risk Based Capital - RBC Commentary

Since August, 2015, the American Academy of Actuaries (AAA) has been working to adjust the NAIC Life RBC (C1o) formula. The current comment period ends July 24.  AQS' response hereThe NAIC link here (exposure draft tab). Prior documents here.  It is likely that some of the changes in capital charges will migrate to the Property Casualty Insurers too.   


Digital Currency

Does the term ethereum mean anything to you?  What about blockchain?  Bitcoin?  We've produced a primer on digital currency.  It may be your future.  Or not. 

CoinDash, a blockchain technology startup that bills itself as a social-trading platform, said that its website was hacked Monday and $7 million was stolen from investors trying to participate in the company's initial coin offering.


Dimon on Unwinding QE

Fixed income markets continue to behave as if the Fed doesn't have $4 trillion in securities to unload.  Jamie Dimon, stating the obvious from Paris on July 11 said ""We've never have had QE like this before, we've never had unwinding like this before," "Obviously that should say something to you about the risk that might mean, because we've never lived with it before."


NY Fed:  Bond Market Liquidity Hasn't Deteriorated the umpteenth time, the folks at the NY Fed have extensively researched and published a piece on bond market liquidity.  Their determination?  Bond market liquidity has not deteriorated.


Those that have to trade daily might disagree.  It would appear that some might disagree with the Fed on the soon-to-be coming inflation too.  In fact, short of normalization, the markets disbelieve the Fed's powers of analysis.


UNreinvestment we're calling it, may begin at the end of the year. 



Illinois Passes a Budget...Finally was only a couple years late, well 3 but who's counting?  Threatened with junk status by S&P if they couldn't get a deal by July 1, legislators reconvened on Saturday, July 2.


With $15 billion in unpaid bills and a deficit of $6 billion last year, yields on Illinois municipal debt continued to increase through the July 4 break.


Reducing spending by $2 billion and increasing income tax by $5 billion (32%), the package does not address the state's $130 billion unfunded liability in employee pensions or do enough to pay down bills according to Moody's.



Economy and Rates

The long end has remained stubbornly below 3 (30yr, 2.85%) and 10s touched the 2.4% level only to trade back within the previously established range (10yr, 2.27%).  On Tuesday, volatility jumped when  large 10 year futures buy trades were executed about 8:38am EDT.  Two trades amounting to more than $3.2 billion set the tone.


Employment continues to show strength (+222K June +14K prior) as do earnings (+2.5% YoY) but PPI (2.0 and 1.9 ex food and energy YoY and CPI (1.6% and 1.7% ex food and energy YoY) do not. CPI last 100 years here. The general sentiment is lower for longer - currently.




Corporate Spreads Grind Tighter

BAA Corporate Bond Spreads

Killing my eyes - make it bigger

Mutual Fund and ETF Flows

Maybe this has something to do with it?

Killing my eyes - make it bigger!




Client results shown are calculated using SIA standard investment formulae for portfolios AQS has managed in excess of one year.  Each portfolio complies with governing investment statues, regulatory testing standards and metrics.  Results vary based on the client's specified investment policy, risk tolerance, profit objective and product mix.  AQS works with each client to develop a global understanding of objectives for income and surplus growth as well as product opportunities that represent synergies in terms of growth and diversification.