巴黎银行-新兴市场-市场策略-巴西：从短期接受者身上获利，利润流向纳税人-20190710-6页_610kb

Trade Idea Summary: Emerging Markets (EM) - Brazil

Core Content

This document outlines a trade strategy for the Brazilian DI (Direct Indexed) curve, focusing on profit-taking and new positioning in response to recent market dynamics and economic outlook.

Main Strategy

1. Profit-taking on Short-end Receivers

   • The front end of the Brazilian curve was previously too steep, but this has now corrected.
   • The strategy to flatten the Jul-20/Jan-22 curve has reached the projected level.
   • Action: Close the Jul-20/Jan-22 flattener trade.
     • Spread: 34bp
     • Profit: 31bp (USD711,000)
     • DV01 Allocation: USD20,000

2. Increase Position in Jan-21/Jan-25 Flattener

   • The Jan-21/Jan-25 flattener is still 30bp away from the target.
   • Action: Increase allocation to USD25,000 DV01.
     • Target P&L: +30bp
     • Stop Loss: 15bp P&L

3. Outright Payer Position in April-20

   • The short end of the curve is pricing in a more aggressive easing cycle than what is projected by BNPP's economists.
   • Action: Enter an outright payer position in April-20.
     • DV01 Allocation: USD15,000
     • Target P&L: +30bp
     • Stop Loss: 15bp P&L

Key Views

• The Brazilian curve has undergone significant flattening, reflecting a shift in market expectations.
• The strategy is based on the anticipated lower credit risk for Brazil and the global compression of interest rates.
• The short end of the curve is currently undervalued compared to BNPP's models and economic forecasts, prompting a shift to payer positions.
• The current trade positions aim to capture the benefits of this compression while managing risk.

Market Context

• The strategy is influenced by the systemic global compression of rates, which has affected the local curve.
• There is a call for monetary policy that is less aggressive than what the market is pricing in, leading to a divergence.
• The document references Table 1 and Fig. 1 for detailed market data and analysis.

Important Disclosures

• The document is a marketing communication, not independent investment research.
• It may contain Research content under MiFID II unbundling rules, which is only available to certain clients.
• The information is subject to change and should not be relied upon as an authoritative or sole basis for investment decisions.
• BNPP may have conflicts of interest due to its involvement in trading, underwriting, or advisory roles.
• The indicated prices and strategies are not binding and are based on internal models and assumptions.
• No guarantee of accuracy or completeness is provided for the information or analysis.
• The document does not constitute an offer to sell or a solicitation of an offer to buy any financial instrument.
• It is intended for professional clients and eligible counterparties only.

Regulatory Information

• UK: This document is communicated by BNPP London Branch, authorized and supervised by ECB, ACPR, and FCA.
• France: Produced and/or distributed by BNPP SA and BNPP Arbitrage, both authorized and supervised by ECB and ACPR.
• Germany: Distributed by BNPP S.A. Niederlassung Deutschland, authorized by ECB and ACPR.
• 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 Succursale Italia, authorized and regulated by ECB, ACPR, and Bank of Italy.
• Netherlands: Distributed by BNPP Fortis SA/NV, Netherlands Branch, authorized by ECB and National Bank of Belgium.
• Portugal: Distributed by BNPP - Sucursal em Portugal, authorized by ECB, ACPR, and Banco de Portugal.
• Spain: Distributed by BNP Paribas S.A. Branch in Spain, authorized by ECB and Bank of Spain.
• Switzerland: Intended for Qualified Investors as defined under CISA and CISG.

Summary of Positions

Strategy	Action	DV01 Allocation	Target P&L	Stop Loss P&L
Jul-20/Jan-22 Flattener	Close	USD20,000	+31bp	-
Jan-21/Jan-25 Flattener	Increase	USD25,000	+30bp	15bp
April-20 Payer	Enter	USD15,000	+30bp	15bp

Conclusion

The trade strategy reflects a shift from aggressive flattening to profit-taking and new payer positioning, based on the corrected curve structure and economic expectations. It is essential for investors to understand the risks and limitations of the information provided and consult with professional advisors before making any investment decisions.