MARKET MOVER - BNP PARIBAS - Investment Services India
MARKET MOVER - BNP PARIBAS - Investment Services India
MARKET MOVER - BNP PARIBAS - Investment Services India
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Trade Reviews<br />
Options, Money Market and Bond Trades – Tactical & Strategic Trades<br />
This page summarises our main tactical (T) and strategic (S) trades. The former focus on short-term horizons (a few weeks)<br />
allowing one to play any near-term corrections within a defined trend, while the latter rely on a medium-term assumed trend.<br />
For each trade we provide the expected target and the recommended stop loss.<br />
Current* Targets Stop Entry<br />
Existing Strategies<br />
Yield Curves<br />
EUR Flattener Sell OEZ0 Buy RXZ0<br />
We re-enter flatteners after FOMC. 5y/10y offers the best risk/reward profile.<br />
GBP RV Pay GBP 2/5/10Y 3M Sell L H1H2<br />
5y GBP is back at extremly expensive levels. We entered 2/3 of the position.<br />
Cross Markets<br />
USD Spread Flattener Sell 10Y ASW Buy 2Y ASW<br />
Auction analysis suggests 5y spread tends to widen more compared to 10y and 30y<br />
spreads post-auction (from T-5 to T+5). 5s10s spread curve has flattened<br />
consistently in the past eight auctions, by an average of 4.66bp.<br />
Gilt ASW Buy Gilt 2.75% 2015 OIS ASW<br />
Pure RV trade that looks to play the cheapness of the 5y sector.<br />
Linkers<br />
EUR/FRF BE Spread Buy OBLei-13 BE 2.25% Apr-13 Sell OATi-13 BE 2.50%<br />
Jul-13<br />
Front-end EUR/FRF cash BE spreads do not seem to be pricing the carry<br />
differential ahead with 3m fwds below the 18m range.<br />
Money Markets<br />
Sterling Fly Sell L M1M2M3<br />
Fly decoupled from US one and BoE on hold for a while. Enter half now and on a<br />
move to +1.<br />
Eurodollar box Sell EDM1Z1 Buy EDM2Z2<br />
That box is a safer way to play a protracted Fed status quo.<br />
78.0<br />
(S)<br />
-9.0<br />
(T)<br />
-20.5<br />
(T)<br />
23.0<br />
(S)<br />
-36.0<br />
(T)<br />
-11.0<br />
(S)<br />
-13.0<br />
(T)<br />
65.0 82.0 77.5<br />
(22-Sep)<br />
10.0 -13.0 -5.75<br />
(09-Sep)<br />
-24.75 -18.75 -20.75<br />
(23-Sep)<br />
10.0 26.0 29.0<br />
(09-Aug)<br />
Carry<br />
/ mth<br />
-20.0 -49.0 -43.0 0/+10/+2<br />
(17-Sep) 5bp<br />
-18/-20 5.0 -4.0<br />
(22-Sep)<br />
-18/20.0 -3.0 -7.5<br />
(09-Sep)<br />
Options<br />
USD Conditional Bull-Flattener Sell 6M1Y ATMF Rec Buy 6M5Y ATMF Rec +52k 300k -150k 0k<br />
Realized curve move in a rally is attractive in beating the hurdle of paying upfront for<br />
this trade, and 6m fwd curve is 10bp steeper than spot which makes up for the cost<br />
(typically has been the reverse during crisis).<br />
(S)<br />
(03-Sep)<br />
Sterling Put Spread Buy L M1 9825/9875 P/S 1X2<br />
1.0 50.0 0.0 1.0<br />
Cheap hedge vs the SLS expiry.<br />
(T)<br />
(17-Aug)<br />
Euribor Put Spread Buy ERZ0 9875/50 P 1x2<br />
1.0 12.0 -1.0 1.0<br />
Playing the normalisation of liquidity by year end.<br />
(S)<br />
(30-Jul)<br />
USD Payer Spread 1x2 Buy 1Y10Y Pay ATMF+50 Sell 1Y10Y Pay ATMF + -10k 300k -150k 0k<br />
97.5<br />
(S)<br />
(29-Jul)<br />
In the coming months we see the 10y staying under 3.5% as it has since the Euro<br />
debt crisis unfolded, and probably trading closer to 3%.<br />
Beyond that, we expect a normalization to higher rates although it would be a<br />
stretch to look for 5% in 2011. This trade loses money in 1y time only if we selloff by<br />
almost 200bp.<br />
*Tactical (T) and strategic (S) trades. **Risk: vega, gamma for options, or ΔDV01 for futures, bonds and swaps.<br />
Risk**<br />
P/L<br />
(ccy/Bp)<br />
10K/01 EUR -5k<br />
-0.5bp<br />
-2.0 7k/01 GBP -21k<br />
-3bp<br />
10k/01 USD -2.5k<br />
-0.25bp<br />
15k/01 EUR +90k<br />
+6bp<br />
15k/01 EUR<br />
+105k<br />
+7bp<br />
5K/01 GBP +35k<br />
+7bp<br />
17.5k/01 USD +92k<br />
+5.5bp<br />
1k/01 USD<br />
+52k<br />
5k/01 GBP<br />
+0k<br />
25k/01 EUR 0k<br />
0bp<br />
1k/01 USD<br />
-10k<br />
Interest Rate Strategy 23 September 2010<br />
Market Mover, Non-Objective Research Section<br />
43<br />
www.GlobalMarkets.bnpparibas.com