By Tom Wilson

LONDON, Oct 6 (Reuters)Sterling climbed above $1.30 on Tuesday for the first time in three weeks as investors pushed back expectations for when the Bank of England would cut interest rates below zero.

The pound gained 0.3% in early trading to touch $1.3006, the first time it had broken the mark since mid-September, before giving up its gains. It was last down 0.1% at $1.2962.

Money markets pushed back bets that Britain’s interest rates would turn negative, with investors now seeing rates falling below zero in May 2021. Previously they had expected the Bank of England to cut rates into negative territory in March. BOEWATCH

The BoE, which cut interest rates to a record-low 0.1% in March, is looking at whether it is technically feasible to cut its main interest rate below zero, something that has already been done in Japan and the euro zone.

Bank of England rate-setter Jonathan Haskel said on Monday he saw downside risks to the economy – and also some possible benefits – from cutting interest rates below zero.

The BoE’s chief economist, Andy Haldane, and one of its deputy governors, Dave Ramsden, have expressed doubts about whether negative rates would be helpful. One external policymaker, Silvana Tenreyro, has been more supportive.

“They are still keeping the option open that negative rates could help support the recovery,” said Lee Hardman, currency strategist at MUFG.

Sub-zero rates would likely weaken the pound, at least in the short term, he added.

The pound was flat against the euro EURGBP=D3, last trading down 0.1% at 90.83 pence.

Also supporting sentiment was cautious optimism towards Britain’s trade talks with the European Union. Most analysts now expect London and Brussels to reach a deal before the transition deadline.

Still, Prime Minister Boris Johnson’s

The ProShares UltraPro Short S&P 500 ETF (SPXU) is one of the most popular instruments to short the broad market for trading or hedging purposes. However, its daily -3X leverage factor is a source of drift. It must be closely monitored to detect changes in the drift regime. This article explains what “drift” means, quantifies it in more than 20 leveraged ETFs, shows historical data on SPXU, and, finally, concludes about the current market conditions. The analysis is also valid for Direxion Daily S&P 500 Bear 3X Shares (SPXS), which tracks the same index with the same factor and has almost identical behavior.

Why do leveraged ETFs drift?

Leveraged ETFs often underperform their underlying index leveraged by the same factor. The decay has essentially four reasons: beta-slippage, roll yield, tracking errors, management costs. Beta-slippage is the main reason in equity leveraged ETFs. However, when an asset is in a steady trend, leveraged ETFs can bring an excess return instead of a decay. You can follow this link to learn more about beta-slippage.

Monthly and yearly drift watchlist

A few definitions are necessary before going to the point. “Return” is the return of a leveraged ETF in a given time interval, including dividends. “IndexReturn” is the return of a non-leveraged ETF on the same underlying asset in the same time interval, including dividends. “Lv” is the leveraging factor. “Abs” is the absolute value operator. “Drift” is the drift of a leveraged ETF normalized to the underlying index exposure in a time interval. It is calculated as follow:

Drift = (Return – (IndexReturn x Lv))/ Abs(Lv)

“Decay” means negative drift. “Month” stands for 21 trading days, “year” for 252 trading days. A drift is a difference between 2 returns, so it may go below -100%.

Index

Lv

Ticker

1-month

AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Lexington National Insurance Corporation (Lexington National) (Stuart, FL).

The Credit Ratings (ratings) reflect Lexington National’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The revision of the outlooks to negative reflects a decline in Lexington National’s underwriting results in recent years that has resulted in underwriting and operating performance metrics falling short of the composite averages. Underwriting performance has been impacted negatively by volatility in loss experience, and an above average expense ratio driven by legal and underwriting expenses intended to mitigate losses and address various bail reform legislative efforts. Lexington National’s very strong balance sheet strength is supported by its strongest risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is offset somewhat by limited surplus growth due to annual stockholder dividends. The limited business profile reflects its concentration operating largely as a bail bond surety writer. AM Best views Lexington National’s ERM as appropriate for its risk profile, with close monitoring of agencies and legislative changes.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper