20181030-法国巴黎银行-Brazil_DI_Strategy__Getting_blood_out_of_a_stone_9页_942kb

Summary of Brazil DI Strategy: Getting Blood Out of a Stone

Core Content

This document outlines a Brazil DI (Direct Indexing) strategy focusing on intra-curve relative value opportunities in the context of interest rate derivatives. The strategy is based on the term premium model and historical performance of the spread between 6-year and 3-year DI contracts, specifically FRA Jan-22 and Jan-25. The key idea is to capitalize on the premium compression that has occurred since September 2018, with the potential for an additional ~50 basis points (bp) compression.

Key Messages

• Directional alternatives have been exhausted: The team has already taken positions in FRA Jan-20s21s and FRA Jan-22s23s, with Jan-25 having closed on 30 October 2018.
• Intra-curve strategy: The focus is now shifting to intra-curve strategies to exploit the remaining premium in the DI term structure.
• Strategy Details:
  • Position: Receive Jan-25 and pay Jan-22.
  • Initial Allocation: USD50,000 DV01.
  • Spread: 99bp.
  • Initial Target: 50bp compression.
• Supporting Analysis: Figures 1-3 show that Brazil's DI term premium is still well above average, indicating potential for further compression.

Main Viewpoints

• The team believes that the term premium in Brazil's DI curve remains attractive for relative value trades.
• The current market environment supports the view that the premium between 6y and 3y DI is likely to compress further.
• The strategy is based on historical performance and internal models, which suggest a target compression of ~50 bp.
• The initial position is set with a specific DV01 allocation and spread to capture this expected compression.

Key Information

• Strategy Name: Brazil DI Strategy: Getting Blood Out of a Stone.
• Authors:
  • Gabriel Gersztein (Global Head of Emerging Markets Strategy)
  • Samuel Castro, Luca Maia, Andre Digiacomo (FX & IR Latin America Strategy, Commodity Quant Strategy).
• Document Date: 30 October 2018.
• Market Focus: Brazil's DI term structure.
• Legal Disclaimer:
  • This is non-independent research under MiFID II.
  • It is a marketing communication and not investment research.
  • It does not constitute an offer to sell or advice.
  • The information and opinions are subject to change and not guaranteed in accuracy or completeness.
  • BNPP may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
  • The document is confidential and may not be reproduced or distributed without prior consent.

Additional Notes

• The document includes important disclosures for options, ETFs, and convertible securities, highlighting risks and regulatory considerations.
• It also includes regulatory information for various jurisdictions, including the United States, UK, France, Germany, Belgium, Ireland, Italy, Netherlands, Portugal, Spain, and Switzerland.
• The legal notice emphasizes that:
  • The content is for information purposes only.
  • The document may contain back-tested performance data, which is not indicative of future results.
  • No liability is accepted for any use of the information contained in this document.

Conclusion

The Brazil DI strategy is centered on exploiting the term premium compression in the DI curve, particularly between the 6y and 3y tenors. The team has already positioned in the long end and belly of the curve and now seeks to capture the remaining premium through an intra-curve trade. The strategy is non-independent, confidential, and subject to legal and regulatory constraints across multiple jurisdictions.