20180809-法国巴黎银行-Brazil_strategy__Increase_position_in_FRA_20s21s_after_sell-off__9页_479kb

Summary of the Latin America Strategy Document

Core Content

This document outlines the current strategy for the Brazilian DI (Derivative Interest) market, focusing on FRA (Forward Rate Agreement) positions and risk management practices. It is produced by BNP Paribas Brasil S.A., with contributions from several strategists including Gabriel Gersztein, Samuel Castro, Luca Maia, and Andre Digiacomo. The strategy is part of a long-term approach that has been in place since Q1 2018, emphasizing tactical arbitrage, receiving rates, and dynamic allocation adjustments based on risk assessments.

Main Strategy Points

1. FRA Position Adjustments

• FRA Jan20s21s:
  • Previously targeted at 10.00%, the position was increased by USD 10k DV01 at 10.65% after the market price exceeded 10.25%.
  • The target remains at 10.00%.
• FRA Jan22s23s:
  • A receiver position was held at an entry point of 13.92% with a target of 11.75%.
• Total DI Strategy Allocation:
  • The combined allocation is USD 50k DV01 (USD 40k for FRA Jan20s21s and USD 10k for FRA Jan22s23s).

2. Market Outlook

• The DI market has been dysfunctional in May and June, with premiums above expected levels.
• Despite worsening local and external scenarios, the team believes arbitrage opportunities still exist.
• The model suggests there is substantial premium in the middle and long end of the curve, supporting the decision to increase positions.

3. Risk Hedging

• A USDBRL call spread 1x2 at 4.00-4.40 with a total of USD 300mn has been entered to hedge and protect existing positions.
• This is part of a black swan protection strategy, as outlined in the document Brazil: Entering into a hedging structure for a black swan.

Key Information

• The strategy is based on tactical and arbitrage-based decisions.
• The team is active in calibrating allocations based on domestic risk assessments.
• The document includes charts and tables (Charts 1-2 & Table 1) to illustrate the DI market and model.
• The legal disclaimer is extensive, highlighting the non-independent nature of the research and the potential conflicts of interest.
• It emphasizes that the information is for informational purposes only, and not investment advice.
• Indicative prices are provided but are not binding and may vary significantly depending on model and market conditions.
• Performance data is based on back-testing and simulations, and should not be used as guidance for future performance.

Legal and Regulatory Disclaimers

• The document is non-independent research and may be subject to conflicts of interest.
• It is not investment research under MiFID II and is not subject to any prohibition on dealing ahead.
• Securities and derivatives mentioned may not be eligible for sale in all jurisdictions.
• Performance data is subject to change and not guaranteed.
• The document does not constitute an offer to sell or purchase any financial instruments.
• Confidentiality is emphasized; the information may not be copied or distributed without prior consent.
• The document is intended for Qualified Investors in certain jurisdictions (e.g., Switzerland).
• Options and ETFs are complex instruments and not suitable for all investors.
• Restricted securities may be discussed, and only Qualified Institutional Buyers (QIBs) or non-US persons are eligible to purchase them.

Jurisdictional Notes

• The document is distributed by BNPP subsidiaries and affiliates in various countries, including France, Germany, Belgium, Spain, Italy, Netherlands, Portugal, and Switzerland.
• Each jurisdiction has specific legal and regulatory requirements.
• In the UK, the document is communicated by BNPP London Branch, authorized by ECB, ACPR, and FCA.
• In France, the report is produced by BNPP SA and BNPP Arbitrage, both authorized and supervised by ECB and ACPR.
• In Germany, the report is distributed by BNPP S.A. Niederlassung Deutschland, authorized and supervised by ECB and ACPR, and subject to limited regulation by BaFin.
• In Belgium, the report is distributed by BNPP Fortis SA/NV, authorized and supervised by ECB and ACPR, and subject to limited regulation by FSMA.
• In Ireland, the report is distributed by BNPP S.A., Dublin Branch, authorized and supervised by ECB and ACPR, and subject to limited regulation by Bank of Ireland.
• In Italy, the report is distributed by BNPP Succursale Italia, authorized and supervised by ECB and ACPR, and subject to limited regulation by Bank of Italy.
• In Netherlands, the report is distributed by BNPP Fortis SA/NV, Netherlands Branch, authorized and supervised by ECB and ACPR, and subject to limited regulation by AFM and Dutch Central Bank.
• In Portugal, the report is distributed by BNPP - Sucursal em Portugal, authorized and supervised by ECB and ACPR, and subject to limited regulation by Banco de Portugal and CMVM.
• In Spain, the report is distributed by BNPP S.A., S.E., authorized and supervised by ECB and ACPR, and subject to limited regulation by Bank of Spain.
• In Switzerland, the report is intended solely for Qualified Investors.

Conclusion

The strategy emphasizes active management of FRA positions, arbitrage opportunities, and risk mitigation through hedging structures. It is non-independent research and not investment advice, with legal and regulatory disclaimers for each jurisdiction. The document is intended for professional clients and relevant persons as defined by MiFID II and other financial regulations.