20171108-法国巴黎银行-LATIN_AMERICA_STRATEGY_8页_228kb

LATIN AMERICA STRATEGY Summary

Core Content

This document outlines the DI (Direito de Investimento) Strategy for Latin America, focusing on Brazil, and provides insights into current market conditions, positioning, and monetary policy expectations.

Key Points

• Current DI Positioning:

  • The strategy is currently receiving rates in the DI Jan20sJan21s FRA (structural position) and in DI Jan-23 (tactical, based on the factor model).
  • The DI curve is pricing in a significant hike of approximately 175bp in 2018, but the strategy anticipates two additional 25bp cuts by the BCB (Brazilian Central Bank), bringing the terminal Selic rate down to 6.5% and keeping it on hold thereafter.

• Market vs. Model Discrepancy:

  • The term-premium model indicates an abnormal divergence with market levels. This suggests that the market is pricing in a premium that is not aligned with current inflation dynamics or monetary policy expectations.
  • The model values are significantly lower than the market rates, indicating potential mispricing or overreaction to market events.

• Investor Behavior:

  • Local investors have been reducing their DI receiver positions, which is seen as positive for receiver trades following a market clean-up. This shift in investor behavior may present an opportunity for the strategy.

• Strategy Details:

  • Receive DI Jan-19 at 7.26%.
  • Allocation: USD 30k DV01.
  • Initial Target: 7.06%.
  • Stop Loss: 7.46%.
  • Carry: Negative 0.5bp per month.

• Uncertainties:

  • The strategy acknowledges the uncertainty around the 2018 presidential election, which may influence monetary policy outcomes.
  • Despite these uncertainties, the strategy believes the premium is excessive and not reflective of current economic conditions.

Charts and Tables

• Chart 1: DI model values, showing the discrepancy between market and model rates for various DI tenors.
• Chart 2-3: Implied monetary policy path in the DI curve and local macro funds positioning.
• Table 1: Market and model values for DI Jan-19 to Jan-25, with the ratio of market to model.

Important Information

• The document is produced by Banco BNP Paribas Brasil S.A. and authored by Gabriel Gersztein, Gustavo Mendonca, and Samuel Castro.
• It is a marketing communication and not investment research, as per MiFID rules.
• The strategy is non-independent and may involve conflicts of interest due to interactions with sales and trading teams.
• Indicative prices are provided for informational purposes only and do not represent actual transaction terms.
• No guarantee of accuracy or completeness is made regarding the information or models used.

Legal and Regulatory Information

• The document is subject to legal disclaimers, including:
  • No liability is accepted for any losses arising from reliance on the information.
  • BNP Paribas may have financial interests in the securities or issuers mentioned.
  • Options and ETFs discussed may involve high risk and are not suitable for all investors.
  • Certain securities may be restricted and only available to Qualified Institutional Buyers or non-US persons under Regulation S.
  • The document is not a prospectus and is only for professional clients and eligible counterparties.

Contacts

Disclaimer

• The document contains simulated performance data and back-testing results for illustrative purposes only.
• Past performance is not indicative of future results.
• No investment, financial, legal, or tax advice is provided.
• Confidentiality: The document is provided on a strictly confidential basis and may not be copied or distributed without prior written consent.

Additional Notes

• The document is exclusive to www.baogaoba.xyz and updated daily.
• It is free to share with professional advisers only.