20181113-法国巴黎银行-BRAZIL__Taking_profit_on_1y_local_USD_rates_payer_position_9页_938kb

Summary of Document: TRADE IDEA - BRAZIL: Taking profit on 1y local USD rates payer position

Core Content

This document outlines a trade idea from the BNP Paribas Strategy & Economics team focused on Brazil's local USD rates (Cupom Cambial) and highlights the decision to close a 1-year (1Y) local USD rates payer position with a 28bp profit. The trade idea is part of a broader tactical trading strategy that has already generated a total of 131bp in profit through six previous trade ideas in 2018.

Key Information

• Trade Idea: Closing a 1Y local USD rates payer position for a 28bp profit.
• Strategy: Based on divergences between market values and the fair value model for local USD rates.
• Total Profit for the Year: 131bp from six trade ideas.
• Position Details:
  • Payer Position: FRA Dec-18 versus Jan-20.
  • Notional Amount: USD96mn against USD100mn (FX Delta neutral).
  • Spot Reference: 3.7830.
  • Rate Details:
    • Pay DI Dec-18 at 6.40% (offshore).
    • Receive DI Jan-20 at 7.01% (offshore).
  • DV01: ~USD10,000.
  • Closing Rate: 3.9840%.
• Model vs Market:
  • The gap between the market and the model's fair value estimates has returned to the error band.
  • The model is considered reliable, with values derived from public sources and internal calculations.
  • The strategy is based on the assumption that the market is now in line with the model, justifying the profit-taking decision.

Main Views and Analysis

• The BNP Paribas team has been actively trading local USD rates in Brazil using a tactical approach, capitalizing on discrepancies between market values and their model.
• The 1Y local USD payer position was initiated based on the expectation that the market would diverge from the model, and the position was closed when the gap returned to the model's error bands.
• The profit from this trade is a direct result of the convergence of market and model values.
• The strategy has been consistent throughout the year, with each trade idea contributing to the overall profit.

Strategy Overview

• The team has executed six trade ideas in 2018, each based on the divergence between the model and the market.
• The most recent trade idea resulted in a 28bp profit, bringing the total for the year to 131bp.
• The team remains committed to the initial target and is taking profit on the 1Y local USD rates payer position as the market has aligned with the model.

Legal and Regulatory Disclaimer

• This document is a marketing communication and not investment research.
• It is not intended for non-professional clients or for use in jurisdictions where it may not be eligible.
• The information is based on public sources and internal models, and may not be accurate or complete.
• BNPP may have conflicts of interest due to its involvement in sales and trading, and may engage in transactions that are inconsistent with the views expressed in this document.
• The document may contain back-tested performance data, which is for illustrative purposes only and not indicative of future results.
• It is not a prospectus, nor does it constitute an offer to sell or purchase any financial instruments.
• Recipients are advised to consult independent financial advisors and to understand the risks involved in any transaction.

Additional Notes

• The document is subject to change and may be discontinued.
• It is strictly confidential and should not be copied, reproduced, or distributed without prior written consent.
• The document includes important disclosures for options, ETFs, and other securities, emphasizing the risks involved and the potential for conflicts of interest.
• It is distributed by BNPP group companies in various jurisdictions, including the UK, France, Germany, Belgium, Ireland, Italy, the Netherlands, and Portugal, with appropriate regulatory authorizations.