20180628-法国巴黎银行-Peru_upside_margin_for_Soberanos；going_long_2026s_9页_398kb

Summary of the Latin America Strategy Document

Core Content

This document outlines a strategic investment opportunity in Peruvian sovereign bonds, specifically the 2026 maturity, based on the analysis by Banco BNP Paribas Brasil S.A. The strategy is aimed at real money investors seeking to capture yield in a relatively low-risk asset class.

Key Investment Opportunity

• Asset Class: Peruvian sovereign bonds (Soberanos)
• Maturity: 2026
• Yield to Maturity (YTM): 5.27%
• Model Fair Value: ~5.00%
• Potential Yield Pickup: ~30 basis points (bps) in the 7-year part of the curve
• Proposed Strategy: Long position in Soberanos 2026s at current YTM of 5.27%, with an initial target of 5.00%
• Allocation: EUR 2k DV01
• FX Hedging: FX unhedged due to the expectation of appreciation of the Peruvian sol (PEN)

Model Insights

• The current steepness of the Soberanos curve suggests a mispricing.
• The factor model had previously triggered a short position in the entire curve on 30 March 2018.
• The fair value of the 2026s is estimated at ~5.00%, indicating a potential upside.
• The FEER model suggests that the PEN is expected to appreciate against the USD, which supports the FX unhedged approach.

Main Points

• Market Price vs. Fair Value: The market price of Soberanos 2026 is currently above the fair value estimate, presenting a potential buying opportunity.
• FX Appreciation Expectations: The Peruvian sol is expected to appreciate in the coming quarters, making FX unhedged a strategic choice.
• Investor Targeting: The strategy is targeted at real money investors looking for yield in a low-risk environment.
• Risk Consideration: The document highlights the inherent risks in investing in financial instruments, including market, credit, interest rate, and liquidity risks.

Key Information

• Model Update: The gap between market price and fair value widened to over 25bps.

• FX Rate Table: Theoretical FX rates derived from the sustainable current account balance are provided for several Latin American countries, including Peru.

• Legal Disclaimer:

  • The document is non-independent research and is a marketing communication.
  • It does not constitute investment research and is not intended for retail investors.
  • BNPP may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
  • The document does not provide investment, financial, legal, or tax advice.
  • The information is based on public sources and may not be accurate or complete.
  • The indicative prices are based on internal models and may vary from other sources.

• Important Disclosures:

  • Options and ETFs discussed are complex and may involve high risk.
  • Certain securities may not be registered under US securities laws and are restricted.
  • The document may be distributed only to certain qualified investors in the US, UK, France, Germany, Belgium, Ireland, Italy, Netherlands, Portugal, and Spain.
  • BNPP and its affiliates may hold positions or act as market makers in the instruments discussed.

Conclusion

The document recommends taking a long position in Peruvian sovereign bonds with a 2026 maturity, based on the belief that the current yield is overpriced relative to the model's fair value. The strategy leverages the expectation of FX appreciation and offers a yield pickup opportunity for investors with a low-risk appetite. The report also includes extensive legal and regulatory disclosures, emphasizing the risks involved and the intended audience for the communication.