20180424-法国巴黎银行-LATIN_AMERICA_STRATEGY_9页_362kb

Summary of Latin America Strategy Document

Core Content

This document outlines the Brazil DI (Direct Index) strategy and provides an update on the tactical positioning of DI instruments in light of the upcoming 2018 presidential elections. It highlights the shift in strategy from a more strategic approach to a tactical one, emphasizing the use of models, arbitrage opportunities, and tighter risk management through stop-loss levels.

Main Strategy and Recommendations

• Increased Allocation in DI Jan-25:
  The strategy recommends increasing the allocation in the long end of the DI curve, specifically in DI Jan-25, due to its overbought status according to the DI model. The current market value is 9.77%, while the model value is 9.17%, resulting in a 60bp gap.

  • Trade Details:
    • Receive DI Jan-25 at 9.76% (12:00 PM NYT; on-shore)
    • Allocation: USD 7k DV01
    • Target: 9.30%
    • Stop Loss: 10.00%
    • Carry+Roll: +6.5bp per month

• Tactical Strategy Adjustments:
  The strategy has adopted a more tactical stance, taking advantage of the higher volatility environment by closely following models, arbitraging over- and under-shootings, and applying tighter stop-loss limits.

  • Previously, the strategy recommended reducing the position in DI Jan-20/21 from USD 50k DV01 to USD 15k DV01 once 9.75% was breached, with the current target set at 9.50%.

• Model-Driven Decisions:
  The factor model is used to identify opportunities, such as opening a small receiving strategy on DI Jan-25 at 9.67%.

  • The model is continuously evaluated to adjust positions based on market dynamics and presidential election expectations.

Key Information and Performance

• Performance Recap (since Q1 2016):

  • Total P&L: +562bp
  • Hit Ratio: 73%
  • Total Trades: 21
  • Ongoing Position: Receiving DI Jan-21 with a P&L of +89bp so far.

• Recent Closed Trades:

  • Receive DI Jan-23 closed on 12 January 2018 @ +36bp
  • Receive DI Jan-19 closed on 12 December 2017 @ +28bp
  • Receive DI Jan-25 closed on 09 January 2017 @ +61bp
  • Flattening DI Jan-19/Jan-23 closed on 06 December 2016 @ -44bp
  • Receive DI Jan-19 closed on 28 September 2016 @ +66bp
  • Pay DI Jan-21 closed on 08 Jul 2016 @ -78bp
  • Flattening DI Jan-17/Jan-21 closed on 29 March 2016 @ +30bp
  • Pay DI Jan-17 closed on 23 March 2016 @ -5bp
  • Receive DI Jan-21 closed on 18 March 2016 @ +51bp
  • Receive DI Jan-19 closed on 22 February 2016 @ +40bp
  • Receive DI Jan-19 closed on 29 January 2016 @ +44bp
  • Receive DI Jan-18 closed on 26 January 2016 @ +53bp

• Performance Notes:

  • The performance data reflects historical and back-tested results, which may not be indicative of future outcomes.
  • Simulated performance may not account for liquidity constraints, fees, or transaction costs.

Legal and Regulatory Information

• Non-Independent Research:
  This document is considered non-independent research under MiFID II and is intended for Professional Clients and Eligible Counterparties. It is not investment research and is not subject to any prohibition on dealing ahead.

• Conflicts of Interest:
  BNPP may have financial interests in the securities or instruments mentioned, including long or short positions or acting as an advisor, manager, or underwriter.

  • BNPP may also solicit or perform investment banking services for the entities mentioned.

• Confidentiality:
  The document is provided strictly confidential and should not be copied, reproduced, or distributed without prior written consent.

• Disclaimer:

  • The indicated prices are not actual transaction terms.
  • No liability is accepted for any use of the document or its content.
  • Past performance is not indicative of future results.

• Additional Disclosures:

  • Options and ETFs: These instruments are complex and high-risk, suitable only for sophisticated investors.
  • Restricted Securities: Certain securities may not be registered under U.S. securities laws, and are only available to Qualified Institutional Buyers (QIBs) or non-U.S. persons under Regulation S.

• Distribution Restrictions:

  • The document is distributed only to institutional investors or major U.S. institutional investors.
  • U.S. persons must transact through BNPP Securities Corp. (BNPPSC), which is a registered broker-dealer.

Conclusion

The document reflects a tactical approach to the Brazil DI market, leveraging model-based insights and volatility opportunities. It provides a detailed history of past trades and outlines the current strategy with a focus on DI Jan-25 and risk management. The legal and regulatory disclaimers emphasize the non-independent nature of the report and the confidentiality and liability limitations associated with its use.