巴黎银行-新兴市场-宏观策略-巴西DI策略：暂停与盈利之时-20181016-8页_940kb

Summary of Brazil DI Strategy: Time to Take a Pause and Take Profits

Core Content

This document outlines the strategy and current status of the Brazil DI (Discount Index) trade, specifically focusing on the FRA (Forward Rate Agreement) Jan-21s-20s, which has been the top trade in Emerging Markets/Latin America since Q4 2017. The report is authored by members of the Strategy & Economics team at BNP Paribas, including Gabriel Gersztein, Samuel Castro, Luca Maia, and Andre Digiacomo.

Key Messages

• The FRA Jan-21s-20s trade has been a significant component of the team's strategy.
• The trade was initiated during the Q1 2018 rally, when the FRA reached approximately 9.50%.
• The current allocation is USD15,000 DV01, which is lower than the previously suggested USD50,000 DV01 before the presidential election.
• The strategy's target has been extended three times in the last month, following a rally of 220bp since the beginning of September.
• The team believes it is time to take a pause and re-assess policy scenarios after the recent rally.
• The trade was closed at 9.58%, and the year-to-date P&L stands at USD 8.8mn.

Strategy Overview

• The FRA Jan-21s-20s has shown strong performance, with the current rate at 9.58%.
• The team's factor model suggests that there is little room for further compression in the FRA rates, indicating limited upside potential.
• The team has been managing the DI (Discount Index) allocations in anticipation of the presidential election, which is expected to influence future market conditions.

Market Data (Table)

Legal and Regulatory Information

• The document is a marketing communication and not investment research.
• It is intended for Relevant Persons as defined by MiFID II, including Professional Clients and Eligible Counterparties.
• It may contain Research under MiFID II unbundling rules, which is only available to those who have signed up for BNPP Global Markets Research packages.
• The document may include back-tested performance data, which is for illustrative purposes and not a guarantee of future results.
• It is not a prospectus or public offering and does not provide investment, tax, or legal advice.
• BNPP may have conflicts of interest due to its involvement in transactions, advisory roles, or market-making activities related to the instruments discussed.

Disclaimer

• The information is based on public sources and may not be accurate or complete.
• BNPP does not accept responsibility for the accuracy or completeness of the information or any models used.
• Indicative prices are not actual transaction terms and may vary significantly depending on market conditions.
• The document may be subject to change or discontinuation.
• All disclosures apply to U.S., UK, France, Germany, Belgium, Ireland, Italy, Netherlands, Portugal, Spain, and Switzerland markets, depending on local regulations.

Additional Disclosures

• Options and ETFs mentioned are complex instruments and may involve significant risk.
• Convertible securities or other unregistered instruments may be restricted and only available to certain investors.
• The document is intended for BNPP's clients and may be distributed to U.S. institutional investors via BNPP Securities Corp.
• BNPP and its affiliates may act as market makers, advisors, or underwriters, which could lead to conflicts of interest.

Conclusion

The strategy has delivered strong returns, but the team is suggesting a pause to reassess the policy environment ahead of the presidential election. The current market conditions indicate that further gains may be limited, and the team is advising to take profits and re-evaluate future scenarios.