20181008-法国巴黎银行-Brazil__Target_reached_for_FRA_receiver__+217bp_PnL__9页_970kb

Summary of Trade Idea: Brazil DI Strategy (8 October 2018)

Core Content

This document outlines a trade idea related to Brazil's Domestic Interest (DI) rate strategies, focusing on Forward Rate Agreements (FRA) and the current market outlook ahead of the second round of the Brazilian presidential election.

Key Trade Details

• Trade Idea: Receiving rates via FRA Jan-22s23s.
• Entry Point: 13.92%
• Target: 11.75% onshore.
• Profit Realized: +217 basis points (bp).
• DV01: USD10k.
• Total PnL for DI Strategies YTD: +USD 7.99 million.
• Current DI Position: USD 20k DV01 (FRA Jan-20s21s).

Market and Strategy Context

• The DI curve premium is considered substantial and is not expected to be affected by the outcome of the presidential election.
• The team has advised reducing the preferred trade idea (FRA Jan-20s21s) following a 100bp rally since early September.
• The team plans to adjust allocations ahead of the 28 October second round of the presidential election.

Key Market Data (Table 1)

Key Observations

• The DI curve remains significantly undervalued relative to BNP Paribas economists' expectations.
• There is a notable gap between the model and market rates for various DI maturities.
• The team emphasizes that the premium of the DI curve is substantial and independent of the election outcome.
• The strategy is still in place and the team is monitoring the market for further adjustments.

Additional Information

• The document includes Figures 3 and 4, which highlight the difference between BNP Paribas' economic outlook and the market pricing of DI instruments.
• The team recommends further analysis and is prepared to discuss the trade idea with clients who have sufficient knowledge and professional advice to evaluate the risks and merits.

Legal and Regulatory Information

• This document is a marketing communication and not independent investment research.
• It is intended for Professional Clients and Eligible Counterparties as defined by MiFID II.
• It does not constitute an offer to sell or issue securities, nor a solicitation to buy.
• The document may contain simulated performance data and is not a prospectus.
• BNPP may have conflicts of interest due to its involvement in investment banking and other services.
• It is subject to legal notices in various jurisdictions, including the U.S., UK, France, Germany, Belgium, Italy, and the Netherlands.

Disclaimer

• The information is based on public sources and may not be independently verified.
• No guarantee is made regarding the accuracy, completeness, or reliability of the information.
• Indicative prices do not represent actual transaction terms and are subject to change.
• BNPP does not provide investment, financial, legal, or tax advice.
• Past performance is not indicative of future results.
• The document is for informational purposes only and may not be reproduced or distributed without prior consent.