20180813-法国巴黎银行-LATIN_AMERICA_STRATEGY__Brazil_strategy__Increase_allocation_in_DI_FRA_20s21s_9页_414kb

Summary of the LATIN AMERICA STRATEGY Document

Core Content

This document outlines the Brazil strategy within the broader Latin America strategy framework of BNP Paribas. It provides insights into the firm's approach to DI (Discount Instrument) and FRA (Forward Rate Agreement) strategies, particularly focusing on the FRA Jan20s21s and FRA Jan22s23s instruments. The strategy is based on tactical and arbitraging principles, with a bias towards receiving rates and a dynamic allocation approach that adjusts based on domestic risk assessment and market opportunities.

The document highlights the current market conditions and the firm's decision to increase allocations in response to attractive pricing levels. It also includes legal and regulatory disclosures relevant to various jurisdictions, emphasizing the non-independent nature of the research and the potential conflicts of interest.

Main Points and Key Information

1. Brazil Strategy Overview

• Tactical/Arbitraging Stance: The strategy is based on identifying and capitalizing on mispricings in the DI and FRA markets.
• Bias to Receive Rates: The firm prefers to benefit from rate differentials, especially in times of market uncertainty.
• Dynamic Allocation: Allocations are calibrated based on domestic risk assessments and opportunities for arbitrage.

2. Recent Position Adjustments

• FRA Jan20s21s: Increased allocation to $10.65% with a total DV01 of $40k.
• FRA Jan22s23s: Added $10k DV01 at $11.06%, bringing the total allocation to $60k DV01.
• Target for FRA Jan20s21s: $10.00% remains the final target for this instrument.
• Historical Context: Allocations have fluctuated from $70k DV01 to $30k DV01 and now to $60k DV01, reflecting market conditions and strategic decisions.

3. Market Outlook

• DI Market Dysfunction: The DI market experienced abnormal pricing levels in May/June, with premiums above the firm's negative scenario.
• Model Insights: The firm’s model suggests substantial premium in the belly and long end of the curve, supporting the decision to increase positions.
• Charts and Table: Included for visual representation of the DI market and model outputs (Charts 1-2 & Table 1).

4. Risk Hedging Measures

• USDBRL Call Spread: A 1x2 call spread (USD 100mn and USD 200mn) at 4.00-4.40 was entered to hedge against potential market volatility and protect existing positions.
• Black Swan Protection: The hedging structure is described in detail under the section "Brazil: Entering into a hedging structure for a black swan."

5. Legal and Regulatory Disclosures

• Non-Independent Research: The document is non-independent research under UK FCA rules and is a marketing communication under MiFID II.
• No Investment Advice: BNPP does not provide investment, financial, legal, or tax advice.
• Conflicts of Interest: BNPP may have financial interests in the issuers or have provided investment banking services.
• Confidentiality: The document is provided confidentially and may not be copied or distributed without prior written consent.

6. Jurisdictional Information

• United States:
  • Options and ETFs are complex and high-risk instruments.
  • Certain securities may be unregistered and only available to QIBs or non-US persons.
  • Transactions must be executed through BNPPSC (BNP Paribas Securities Corp.).
• UK:
  • Document is communicated by BNPP London Branch, which is authorized and supervised by ECB, ACPR, and FCA.
• France:
  • Report is 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, and subject to limited regulation by BaFin.
• Belgium:
  • Distributed by BNPP Fortis SA/NV, authorized and supervised by ECB, ACPR, and FSMA.
• Ireland:
  • Distributed by BNPP S.A., Dublin Branch, authorized and supervised by ECB and ACPR.
• Italy:
  • Distributed by BNPP Succursale Italia, authorized and supervised by ECB and ACPR, and subject to limited regulation by Bank of Italy and CONSOB.
• Netherlands:
  • Distributed by BNPP Fortis SA/NV, Netherlands Branch, authorized by ECB, ACPR, and NCB, and subject to limited regulation by AFM and De Nederlandsche Bank.
• Portugal:
  • Distributed by BNPP Sucursal em Portugal, authorized by ECB, ACPR, and Banco de Portugal, and subject to limited regulation by CMVM.
• Spain:
  • Distributed by BNPP S.A., S.E., authorized by ECB and ACPR, and subject to limited regulation by Bank of Spain.
• Switzerland:
  • Intended for qualified investors only, as defined under CISA and CISO.
  • Includes regulated financial intermediaries, insurance institutions, pension funds, and professional treasury operators.

Conclusion

The document reflects a strategic and opportunistic approach to the DI and FRA markets in Brazil, with a focus on arbitrage opportunities and risk management. It also emphasizes regulatory compliance and confidentiality, and is intended for professional investors only. The legal notices and jurisdictional information are extensive and highlight the complex regulatory environment in which BNPP operates.