20180503-法国巴黎银行-Target_reached_for_Brazil_structural_receivers__+105bp_P_L_what_to_do_now__9页_363kb

Summary of the Latin America Strategy Document

Core Content Overview

This document outlines the current strategy and recommendations for Brazil's DI (Direct Investment) and FRA (Forward Rate Agreement) positions, as well as a recap of past trades and their performance since Q1 2016. The strategy is primarily focused on interest rate derivatives, particularly DI FRA positions, and includes both structural and tactical considerations.

Main Strategy and Recommendations

Target Reached for Brazil DI FRA Jan-20/Jan-21

• The DI FRA Jan-20/Jan-21 position has reached a +105bp P&L (Profit and Loss).
• The position was entered at 10.60% and closed at 9.55%, resulting in a profit of USD 4.4 million.
• The allocation was substantial, with USD 50,000 DV01 (Dollar Value of a Basis Point).

Current Strategy Adjustment

• The team now recommends locking in profits on the DI FRA Jan-20/Jan-21 position.
• They suggest a tactical approach due to the reduced risk-reward ratio of extending the target further.
• A hedge (USDBRL CS 3.55-3.85) is being reduced, resulting in a 0.05% loss.

Position in DI Jan-25

• The team is increasing the allocation in DI Jan-25 with USD 15k DV01.
• This is part of a strategic move to position in the long end of the curve.

Key Information and Analysis

Term Structure and DI Curve

• The document includes a term structure of the 1y FRA and DI curve (Table 1 and Charts 1-2).
• The model indicates that the current market prices are in line with the strategy's expectations, with no significant gap observed.

Past Trade Performance

• Total P&L from recommended trades since Q1 2016: +667bp.
• Hit ratio: 73%.
• A list of closed trades includes:
  • Receive Brazil DI FRA Jan20/Jan21 @ +105bp
  • Receive DI Jan-23 @ +36bp
  • Receive DI Jan-19 @ +28bp
  • Receive DI Jan-25 @ +57bp
  • Flattening DI Jan-19/Jan-23 @ -44bp
  • Receive DI Jan-19 @ +66bp
  • Pay DI Jan21 @ -78bp
  • Flattening DI Jan-17/Jan-21 @ +30bp
  • Pay DI Jan17 @ -5bp
  • Receive DI Jan-21 @ +51bp
  • Receive DI Jan-19 @ +40bp
  • Receive DI Jan-18 @ +53bp

Forward Looking Strategy

• The team is transitioning from a structural strategy to a more tactical one as the 2018 presidential elections approach.
• This shift is due to the changing risk-reward profile and market conditions.

Important Legal and Regulatory Information

Disclaimer and Conflicts of Interest

• The document is a marketing communication and not independent investment research.
• It may be subject to conflicts of interest due to interactions with sales and trading.
• BNPP may engage in transactions inconsistent with the views expressed, either for its own account or for clients.

Non-Independent Research

• The document may contain "Research" as defined under MiFID II unbundling rules.
• It is intended for firms that have signed up to BNPP Global Markets Research packages or are out of scope of MiFID II unbundling rules.

Legal Restrictions

• The document is for the use of intended recipients only and may not be reproduced or distributed without prior written consent.
• It is not a prospectus or public offering and does not constitute investment advice.
• Transactions may involve high risk and volatility, including market, counterparty, and liquidity risks.

U.S. Disclosures

• Options and ETFs discussed are subject to specific disclosures and may not be suitable for all investors.
• Certain securities may not be registered under U.S. securities laws and are restricted.
• U.S. persons must transact through BNPPSC unless authorized otherwise.

Other Jurisdictional Disclosures

• The document is communicated in the UK by BNPP London Branch.
• In France, it is produced and distributed by BNPP SA and BNPP Arbitrage.
• In Germany, it is distributed by BNPP S.A. Niederlassung Deutschland.
• In Belgium, it is distributed by BNPP Fortis SA/NV.
• In Ireland, it is distributed by BNPP S.A., Dublin Branch.
• In Italy, it is distributed by BNPP Succursale Italia.
• In the Netherlands, it is distributed by BNPP Fortis SA/NV, Netherlands Branch.

Indicative Pricing and Risk

• Indicative prices are based on BNPP's internal models and may differ from market prices.
• No assurance is given that transactions will be entered into on the terms indicated.
• Performance data may be based on back-testing and is not indicative of future results.
• The information is for discussion purposes only and should not be relied upon as authoritative.

Conclusion

The strategy highlights a successful DI FRA trade in Brazil with a significant P&L, and suggests moving towards a more tactical approach in light of the upcoming elections. The team remains open to re-entering the position if macroeconomic conditions and domestic market dynamics allow. The document serves as a strategic guide and includes important legal and regulatory disclaimers.