20170125-法国巴黎银行-How_much_risk_premium_for_European_assets__18页_1mb

BNP Paribas Markets Call Summary (25 January 2017)

Core Content

BNP Paribas provides a weekly cross-asset market view, focusing on the performance of European and US assets, the risk premium in European markets, and the impact of political factors on financial markets. The report highlights the underperformance of European equities relative to US markets, despite strong economic data and ECB support. It suggests that the risk premium in European assets is more influenced by political uncertainty than economic fundamentals.

Main Views

• European Assets Underperformance: Despite strong economic data, European equities have underperformed US equities. This underperformance is even more pronounced when returns are calculated in USD, which is unexpected given the EUR's weaker value.
• Credit Markets: Both European and US credit markets have performed similarly, with US high yield (HY) bonds supported by low issuance and high inflows. European issuers have started to lock in spreads at current low levels.
• Risk Premium: The report suggests that European equities may offer a higher risk premium, particularly in light of upcoming political events, such as the French presidential election.
• Volatility Trends: Volatility in European markets is expected to remain subdued as yields trend slightly higher. This is reflected in the steepening of volatility and rate curves.
• FX Market Dynamics: EUR volatility is declining, and the EURUSD volatility curve appears inverted over the 2m-3m segment, which may change as European political risks increase.
• Brexit Impact: The GBP has been underpriced in FX markets, but the risk premium is not excessively high. FX markets have already priced in negative expectations for Brexit, though the currency may strengthen as political uncertainty eases.
• ETF and Fund Flows: ETF and fund flows confirm the performance trends, with US equities and bonds receiving significant inflows, while European markets have seen outflows.

Key Information

Market Performance

Political Risk and Volatility

• The Vstoxx (V2X) term structure is steep, while EURUSD volatility appears inverted, indicating potential for a flattening of the Euro Stoxx volatility curve and a steepening of EURUSD volatility ahead of European political events.
• The report suggests that European political risks may be priced more aggressively in FX volatility markets than in equity volatility, similar to the pattern observed during Brexit.
• The recommended trade is to buy the V2X March contract at 18.75 and sell the V2X April contract at 22.30, while entering a 1m2m forward EURUSD vol swap at $9.025%$.

Legal and Disclaimers

• The document is a marketing communication and not independent research.
• It is intended for Professional Clients and Eligible Counterparties under MiFID.
• The information is not investment advice and should not be relied upon as authoritative.
• BNP Paribas may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
• All performance data is based on back-testing and is for illustrative purposes only.
• Indicative prices and terms are not actual transaction terms and are subject to change.

Conclusion

The report highlights the importance of political factors in shaping the risk premium in European markets. While European economic data is strong and the ECB is supportive, the underperformance of European assets compared to US markets suggests continued political uncertainty. The recommended trade strategy is to position for a flattening of the Euro Stoxx volatility curve and a steepening of EURUSD volatility, anticipating a shift in market dynamics ahead of key European events.