20181008-法国巴黎银行-Brazil__increasing_position_in_DI_FRA_20s21s_receiver_8页_415kb

Trade Idea Summary: Brazil - DI FRA 20s21s Receiver Strategy

Core Content

This document outlines a trade idea focused on Brazil's DI (Direito de Subscrição) Forward Rate Agreements (FRA) in the context of the country's financial markets and upcoming presidential election. The strategy involves managing positions in DI FRA contracts, with an emphasis on receiving FRA contracts and adjusting allocations based on market dynamics and internal economic models.

Main Trade Ideas

• FRA Jan-20s21s Receiver:

  • The strategy's favorite trade is receiving the FRA Jan-20s21s.
  • Position was reduced on Friday following a rally of 100bp since the beginning of September.
  • Current allocation is USD 20k DV01.
  • The team expects an additional premium of approximately 70bp in the short end of the curve.

• FRA Jan-22s23s Receiver:

  • Profits were taken on this position at 10.75%.
  • Allocation was USD 10k DV01 with a P&L of +217bp or USD 2.70mn.

• FRA Jan-21s20s Receiver:

  • The team is increasing the allocation by USD 10k DV01 to USD 30k DV01 at 10.21%.
  • Year-to-date P&L for this strategy is USD 7.3mn.
  • Target remains at 10.00%, which may be extended based on market conditions.

Strategic Context

• The trade decisions are based on the firm's factor model and internal monetary policy call.
• The team believes the premium in the DI curve is substantial and independent of the outcome of the presidential election.
• Allocations will be adjusted ahead of the 28 October second round of the Brazilian presidential election.

Key Points

• Market Dynamics: The DI curve still shows a significant gap between the official economic call and what is priced in the market.
• Risk and Volatility: The document highlights the high degree of risk and volatility associated with the transactions, including market developments, counterparty risk, and liquidity risk.
• Confidentiality: The information is provided on a strictly confidential basis, and recipients must not distribute it without prior written consent.
• Non-Independent Research: The document is classified as non-independent research and is intended for marketing purposes, not as investment advice.

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• The document does not constitute a prospectus and is not intended to be relied upon as an authoritative source for investment decisions.

US Disclosures

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Disclaimer

• This document is not investment advice and does not constitute an offer to sell or issue any financial instruments.
• Information and opinions are based on public sources and are not guaranteed for accuracy or completeness.
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• Indicative prices and terms do not represent actual transaction terms and are subject to change without notice.