20181127-法国巴黎银行-ISDA__Preliminary_fallbacks_announced_8页_977kb

FOCUS | EUROZONE Summary

Core Content

This report provides an analysis of the ongoing benchmark reform in the Eurozone, focusing on the fallback methodologies for LIBOR and other reference rates. It outlines the preliminary results from the ISDA consultation and offers trade ideas based on expected movements in basis curves.

Key Message

• ISDA Consultation Results: The overwhelming majority of respondents prefer the 'compounded setting in arrears rate' for the adjusted risk-free rate (RFR) and the 'historical mean/median approach' for the credit component of LIBOR backups.
• Methodology Consistency: Most respondents prefer using the same methodologies across all benchmarks, including USD LIBOR and EURIBOR.
• Fallback Methodologies: ISDA expects to proceed with developing fallbacks based on the compounded setting in arrears and historical mean/median approaches for all benchmarks covered in the consultation.
• Basis Curve Flattening Risk: Basis curves are at risk of further flattening across currencies, especially in GBP and EUR.

Trade Ideas

EUR: 6m OIS/BOR Basis Flattener

• Strategy: Receive around the 4y4y forward point versus pay the longer end such as the 30y10y forward.
• Entered: 12bp
• Target: 0bp

EUR: 3s6s Basis Widener at the Very Long End

• Strategy: Pay 3s6s basis 20y20y forward.
• Entered: 0.75bp
• Target: 9bp

These trade ideas are part of the broader analysis on benchmark reform discussed in the October deep dive report.

Charts and Figures

• Fig. 1: ISDA credit spread methodologies for 3m GBP Libor
• Fig. 2: Fallback for 3M GBP LIBOR versus OIS
• Fig. 3: Fallback for 6M GBP LIBOR versus OIS
• Fig. 4: Fallback for 3M EURIBOR* versus EONIA OIS
• Fig. 5: Feedback for 6M EURIBOR* versus EONIA OIS
• Fig. 6: GBP, EUR and USD 3M OIS/BOR
• Fig. 7: GBP, EUR and USD 3s1s basis
• Fig. 8: GBP, EUR and USD 3s6s basis

These charts illustrate the expected movements of basis curves based on the selected historical window.

Important Information

• The document is written by BNP Paribas' Strategist and Economist teams and is not an exhaustive analysis.
• It is non-independent research and may be subject to conflicts of interest.
• The content may include "Research" as defined under MiFID II unbundling rules.
• The document is for information purposes only and does not constitute an offer to sell or issue any financial instruments.
• Indicative prices and terms are not guaranteed and may vary significantly.
• The document may contain back-tested performance data, which is for illustrative purposes only.
• The information is not intended to provide investment, tax, or legal advice.
• Transactions involving the products discussed may involve a high degree of risk and are only available to Relevant Persons.

Regulatory Disclosures

• UK: This document is communicated by BNPP London Branch, which is lead supervised by the ECB and ACPR.
• France: This report is produced and/or distributed by BNPP SA and/or BNPP Arbitrage.
• Germany: This report is distributed by BNPP S.A. Niederlassung Deutschland, authorized and supervised by the ECB and ACPR.
• Belgium: BNPP Fortis SA/NV is authorized and supervised by the ECB and the National Bank of Belgium.
• Ireland: This report is distributed by BNPP S.A., Dublin Branch, regulated in France by the ECB and ACPR.
• Italy: This report is distributed by BNPP Succursale Italia, authorized and supervised by the ECB and ACPR.
• Netherlands: This report is distributed by BNPP Fortis SA/NV, Netherlands Branch, supervised by the ECB, National Bank of Belgium, and AFM.
• Portugal: BNPP - Sucursal em Portugal is authorized by the ECB, ACPR, and Banco de Portugal.
• Spain: This report is distributed by BNPP S.A., S.E., a branch of BNPP S.A., supervised by the ECB and ACPR.

Disclaimer

• This document is for information purposes only and does not constitute investment research.
• The information and opinions are based on public sources and may not be independently verified.
• BNPP does not accept any responsibility or liability for the accuracy or completeness of the information.
• The document may contain performance data based on back-testing and is not indicative of future results.
• BNPP may have financial interests in the issuers or entities mentioned and may engage in transactions inconsistent with the views expressed.
• The document is not intended to be relied upon as an authoritative source or as a substitute for independent judgment.
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