巴黎银行-拉美地区-宏观策略-墨西哥：减少定位和评估新方案-20181029-8页_940kb

Trade Idea Summary: Mexico and TIIE in Emerging Markets (Latam)

Overview

This document provides a trade idea summary for the Mexican peso (MXN) and the Mexican Interbank Overnight Interest Rate (TIIE) in the context of Latin American emerging markets, dated 29 October 2018. It outlines strategic positions and market outlook from BNP Paribas analysts.

Key Messages

• MXN and TIIE Premium: Both MXN and TIIE offer substantial premiums.
• New Administration Signals: The latest signals from the upcoming new administration are not supportive of further risk-taking in rates.
• Mexican Assets Valuation: Mexican assets are currently undervalued and could become even cheaper.
• Similar Dynamics to Brazil: There is a concern that the market may be entering a bearish phase similar to Brazil in 2015-16, where prices are more influenced by news and speculation than macroeconomic fundamentals.

Strategic Positions

• TIIE 5y5y Receivers: Closed positions with a negative P&L of 77bp.
• TIIE 5y vs IBR 5y: Closed positions with a negative P&L of 113bp.
• TIIE 2s5s7s Fly (Paying the Belly): Closed with a positive P&L of 21bp (USD563,000).
• TIIE 1y1y Receivers: Positions are maintained in TIIE 1y1y receivers.

MXN Position

• Long against EUR: Holding a long position against EUR with a P&L of +0.40%.
• Bias: The bias is bullish due to carry considerations.

Market Analysis

• TIIE Mispricing: According to the factor model, TIIE 5y and 10y are trading 100bp above fair value.
• Price Volatility: Prices are increasingly driven by speculation and news, rather than underlying economic fundamentals.

Legal and Regulatory Information

• Non-Independent Research: This document is non-independent research and may be subject to conflicts of interest.
• Marketing Communication: It is a marketing communication and not investment research.
• Confidentiality: The information is provided on a strictly confidential basis and should not be distributed without prior written consent.
• Disclaimer: BNPP does not accept responsibility for the accuracy or completeness of the information and does not provide investment, financial, legal, or tax advice.
• Performance Data: Performance data may be based on back-testing and is not indicative of future results.

US Disclosures

• Options: Options are complex instruments and may not be suitable for all investors.
• ETFs: ETFs discussed may involve tracking error, currency, and geopolitical risks.
• Restricted Securities: Some securities may not be registered under US law and are only available to Qualified Institutional Buyers (QIBs) or non-US persons under Regulation S.

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