巴黎银行-欧洲-外汇策略-英镑利率：通过支付方互换做空头寸-20190808-6页_991kb

G10 Interest Rates Summary

Core Content

This document provides a trade idea and market analysis focused on the British Pound (GBP) interest rates, specifically through the use of payer swaptions. It outlines a strategy to take a short position in the GBP rate market in a cost-effective manner, while limiting downside exposure.

Trade Idea

• Buy GBP100m 18m2y ATMF+50bp (strike 1.08%) payer swaption.
• Sell GBP100m 18m2y ATMF+75bp (strike 1.33%) payer swaption.
• Entry: 81k (about 4bp) net premium.
• Target: 230k (about 11.5bp).
• Spot Ref 2y: 0.667%.
• Spot Ref 18m2y: 0.58%.
• 1y Carry Roll: -45k (about -2.3bp).
• Delta at Initiation: -7.9%.
• Vega (for 10% change in vol): 9.3k.

Main Views

• Brexit Impact: If a Brexit deal is reached or Article 50 is revoked, there is potential for a significant rise in GBP rates. The report suggests a rebound in the investment side of the economy and resumption of rate hikes in late 2020.
• Political Uncertainty: The policy path is uncertain, with an increased probability of a 'no deal' scenario, which may lead to rate cuts.
• Market Expectations: The market is currently pricing in a full 25bp rate cut by January 2020, reflecting global expectations.
• Strategy Preference: The document favors buying ATMF+50bp versus selling ATMF+75bp payer swaptions as a cost-effective way to be short the market without unlimited downside exposure.

Key Information

• Figure 1 shows the GBP 2y swap rate and option strikes, indicating that the 2y swap rate was above the first strike at the start of the year.
• Figure 2 illustrates the net pay-off of the trade idea.
• Risk Disclaimer: This document is a marketing communication and not investment research. It may contain Research content, which is intended for certain professional clients and investors.
• No Investment Advice: BNPP does not offer investment, financial, legal, or tax advice. The information is for informational purposes only.
• Conflicts of Interest: BNPP may have financial interests in the securities or issuers mentioned, and may engage in transactions inconsistent with the views expressed in the document.
• Performance Data: The document may include back-tested performance data, which is for illustrative purposes and does not guarantee future results.
• Legal and Regulatory Information: The document is subject to various legal and regulatory disclosures depending on the jurisdiction. It is only intended for "Relevant Persons" as defined by MiFID II and other applicable laws.

Jurisdictional Disclosures

• UK: The document is communicated by BNPP London Branch and is not a prospectus.
• France: Produced and distributed by BNPP SA and BNPP Arbitrage, both authorized and supervised by the ECB and ACPR.
• Germany: Distributed by BNPP S.A. Niederlassung Deutschland, subject to limited regulation by BaFin.
• Belgium: Distributed by BNPP Fortis SA/NV, authorized and supervised by ECB and National Bank of Belgium.
• Ireland: Distributed by BNPP S.A., Dublin Branch, regulated in France.
• Italy: Distributed by BNPP Italian Branch, authorized and supervised by ECB and ACPR.
• Netherlands: Distributed by BNPP Fortis SA/NV, Netherlands Branch, supervised by ECB, National Bank of Belgium, and AFM.
• Portugal: Distributed by BNPP - Sucursal em Portugal, authorized and supervised by ECB, ACPR, and Banco de Portugal.
• Switzerland: Intended solely for "Qualified Investors" as defined by CISA and CISO. BNPP (Suisse) SA is authorized by FINMA.
• Canada: BNP Paribas operates as a Schedule III Bank and under International Dealer Exemption. The document is in English for Quebec recipients.

Summary

The report recommends a structured approach to short GBP rates using payer swaptions, considering the potential for rate hikes in case of a Brexit deal or Article 50 revocation, while also acknowledging the increased probability of a 'no deal' scenario. It emphasizes cost-effective strategies and highlights the importance of market conditions and political developments in shaping the policy path. The document serves as a marketing communication and is not intended as investment advice, with detailed legal and jurisdictional disclosures provided for clarity and compliance.