20181210-法国巴黎银行-Brazil__Extending_local_USD_18m_rates_payer_position__Cupom__9页_412kb

Summary of the Document: Brazil - Extending Local USD 18m Rates Payer Position (Cupom)

Core Content

This document outlines a trade idea related to the Brazilian local USD rates (Cupom cambial) market, specifically focusing on extending a payer position in the FRA Apr-19 versus Jul-20. It is a strategic update from the BNP Paribas team in Latin America, detailing their analysis and adjustments to the trade based on the current market conditions.

Key Messages

• The trade idea involves extending the stop loss to 3.50% on the existing payer position.
• The gap between the market and the model's fair value estimate is now close to 60 basis points (bp), which the team considers too high.
• The model has adjusted to the upside, indicating a potential mispricing in the market relative to their fair value estimates.

Local USD Rates Model vs. Market Values

• The gap (difference between model and market) is negative across most tenors, indicating the model is higher than the market.
• The largest gap is observed at 7Y with a -80 bp difference.
• The team is monitoring the divergence and has decided to extend the stop loss to 3.50% to manage risk.

Trade Recap

The team has executed six trade ideas this year, with a total profit of 131 bp:

1. Payer trade closed on 1 February – 27 bp profit
2. Payer trade closed on 10 April – 25 bp profit
3. Payer trade closed on 23 May – 6 bp loss
4. Receiver trade closed on 24 September – 30 bp profit
5. Payer trade closed on 25 October – 26 bp profit
6. Payer recommendation closed on 13 November – 28 bp profit

These trades reflect a tactical approach to capitalize on the divergence between market values and fair value estimates.

Legal and Regulatory Disclosures

• The document is a marketing communication and not investment research.
• It is not intended for retail investors and is only for Relevant Persons as defined under MiFID II.
• The content may include research, which is only available to:
  • Firms in scope of MiFID II that have signed up to BNPP Global Markets Research packages
  • Firms out of scope of MiFID II
• BNPP may have conflicts of interest due to its role in trading, underwriting, or advising on the instruments discussed.
• The information is not guaranteed in terms of accuracy or completeness.
• Indicative prices are based on internal models and are not actual transaction terms.
• Back-testing results are hypothetical and may not reflect real-world market conditions such as liquidity constraints or transaction costs.
• Transactions may involve high risk, including:
  • Market risk
  • Counterparty risk
  • Credit risk
  • Illiquidity risk
• No assurance is given that the indicated returns or results will be achieved.

Important Disclosures

• Options are complex and may be suitable only for sophisticated investors.
• ETFs carry risks such as tracking error, currency risk, and credit risk.
• Convertible securities may be unregistered and are only available to Qualified Institutional Buyers or non-U.S. persons.
• The document is not a prospectus and is intended for general information only.

Distribution Jurisdictions

• The document is distributed by BNP Paribas in various jurisdictions, including:
  • United States: Only to institutional investors via BNPP Securities Corp.
  • United Kingdom: Communicated by BNPP London Branch.
  • France: Produced and distributed by BNPP SA and BNPP Arbitrage.
  • Germany: Distributed by BNPP S.A. Niederlassung Deutschland.
  • Belgium: Distributed by BNPP Fortis SA/NV.
  • Ireland: Distributed by BNPP S.A., Dublin Branch.
  • Italy: Distributed by BNPP Succursale Italia.
  • Netherlands: Distributed by BNPP Fortis SA/NV, Netherlands Branch.
  • Portugal: Distributed by BNPP - Sucursal em Portugal.
  • Spain: Distributed by BNPP S.A., S.E.
  • Switzerland: Intended for Qualified Investors.

Final Notes

• The document is confidential and not to be distributed without prior written consent.
• All estimates and opinions are subject to change without notice.
• Past performance is not indicative of future results.