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Morning Coffee: Only two species of banker will get bonuses this year. The traders who are never happy

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Are you a star performer, not just in your own mind but in terms of achieving actual quantifiable results? Are you a millennial? If you work at UBS or many of its rivals, then you’d better fall into one or both of those categories if you’re hoping for a big bonus.

Overall, 2017 awards for UBS’s investment bank are on average compared to the previous year, but it allocated the biggest discretionary payouts to the highest revenue-generators and younger employees as the competition from other industries intensifies, according to Bloomberg.

The strategy is in line with other investment banks. Average performers may see no increase as investment banking pay falls across the industry.

Barclays’s top investment banker told staff he’ll sharpen divisions in bonuses, boosting pay for top performers while cutting it for those in the bottom half. Andrea Orcel said that it would be a “tricky year” for compensation in UBS’s investment bank but it did slightly better than a year earlier. Credit Suisse plans to increase its bonus pool by a low single-digit percentage for 2017 as it makes progress on its three-year restructuring plan.

Bright shining stars and rising twenty-somethings are still likely to get healthy bonuses, but the middle of the bell curve could be disappointed.

Separately, bond traders have been waiting for volatility for some time, but now that it’s actually here things aren’t as fortuitous as they’d hoped. Bloomberg reports that bond traders are now fretting about the wrong kind of volatility, with the market having a “panic attack” partly induced by the uncertainty surrounding the new Federal Reserve Chairman Jerome Powell.

Benchmark 10-year Treasury yields held their ground on Thursday, stocks plunged to their lowest levels in two months, the CBOE Volatility Index – the VIX – is below its recent peak and its bond-market cousin, the 10-year U.S. Treasury Note Volatility Index, saw the steepest one-day increase in two years, according to Bloomberg.

Bond traders are bracing for a climb in yields and volatility across the curve. Just a week ago, many would have welcomed that prospect, but now some fear an impending bear market in bonds.

Every story needs a villain. The surge in market volatility this week, after a long period of tranquility, left critics began pointing to risk-parity funds, an obscure investment strategy pioneered by the world’s largest hedge fund, Bridgewater Associates.

And as bad as the stock market turbulence has been from volatility-linked products, it could be even worse someday because of exchange-traded loan funds.


A senior German central banker has urged U.K. banks to speed up their Brexit plans and apply for E.U. banking licenses or they’ll be left “high and dry.” (FT)

BNP Paribas is redeploying its London employees to new positions before their roles are moved to Paris because of Brexit. (FinancialNews)

Things are looking up for some European banks. (FT)

Société Générale’s equities-trading business returned to being one of its strengths. (Bloomberg)

Deutsche Bank and J.P. Morgan were chosen by money managers as the best generalist sales firms. (Institutional Investor)

Credit Suisse and Nomura may face mis-selling charges after the closure and suspension of a suite of short volatility exchange-traded notes (ETNs). (InvestmentWeek)

Citi expects its investment banking revenues to grow in emerging markets. (NASDAQ)

Goldman Sachs has been moving decidedly down market. (Business Insider)

All’s well at KKR. (Pensions&Investments)

Morgan Stanley says bitcoin is in danger of becoming a victim of its own success. (Business Insider)

Hal Varian, chief economist at Alphabet Inc.-owned Google, is a big fan of automation. (WSJ)

Cryptocurrency and blockchain investors have piled in to support a first-time Democratic congressional candidate, Brian Forde, in the O.C. (Bloomberg)

A star VC says the next big thing will be “coaching networks” that gather data on your personal habits, compare them against the statistically-proven best way to do things, and figure out how to constructively guide you towards success. (Business Insider)

A banker who rode a police motorbike speeding through the congested streets of central London wearing a police jacket was convicted of deception. (The Telegraph)

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