Market Mover - BNP PARIBAS - Investment Services India

This section is classified as non-objective researchTrade ReviewsOptions, Money Market and Bond Trades – Tactical & Strategic TradesThis page summarises our main tactical (T) and strategic (S) trades. The former focus on short-term horizons (a few weeks),allowing one to play any near-term corrections within a defined trend, while the latter rely on a medium-term assumed trend.For each trade we provide the expected target and the recommended stop loss.Current StrategiesYield CurvesEur 1y fwd 2y/5y/10y swap fly REC 1y fwd swap fly50% entered at 16.1 we would add the rest at 20bp. Observed fwd fly is still trading13.5bp above its fair value and the spot/fwd differential is very high.USD Box Spread : buy 6mth fwd vs 1y fwd BUY 2s10s . 6M-fwd vs 1Y-fwdFlattening implied from 6m- to 1y-fwd is too little compared to history, and positionhas little negative roll. Will tend to work in a selloff, and risk-reward lookscomparitively better compared to other bearish trades.LinkersUSD TIPS Swap BE : Long 10y Inflation swap Short TIPS BE 0.625% July 2021BUY . . 10yMarket is long TIPS and TIPS BE look rich vs swap, especially taking into accountlevel of stress on libor and upcoming 10y TIPS supplyMoney MarketsSell M5Z5M6 Eurodollar fly SELL M5Z5M6 . .Z5 looks quite cheap on the curve vs surrounding contracts (same goes for 4y1yswaps). On a fly, these points look almost at all-time cheap levels, and an addedfeature of the trade is its lack of directionality.May 2012 MPC gap PAY Sonia MPC . May 2012Position closed on 7th Oct at 0.4875. P&L: Eur +101k.Current* Targets Stop Entry10.0(T)0(S)33(S)7(T)0.49(S)2/3 23 16.1(26-Sep)30 -8 10(19-Jul)48 33 38.25(09-Sep)-3 16 9.5(21-Sep).53 .35 .43(11-Aug)OptionsZ1 Euribor 99.50 Call BUY Euribor 99.50 Call Z11.0Nuke option on the ECB.(S)USD Swaption Payer 7y/10y15y Fly BUY . . 1y payer-257s10s15s (either spot or 1y-fwd) has rarely gone above the current level of 11bp in (S)its entire history, but using payers one can sell the fly at 17bp (due to vol advantage)if the trade is in the money at expiry.*Tactical (T) and strategic (S) trades. **Risk: vega, gamma for options, or ΔDV01 for futures, bonds and swaps.10 0 1(10-Aug)300 -150 0(14-Jun)Carry/ mthRisk**10K15KP/L(ccy/Bp)EUR+61kUSD-150K+1 40K USD-160k30k10KUSD+75KGBP+87.5k12.5K EUR0K1k USD-25kInterest Rate Strategy 27 October 2011Market Mover61www.GlobalMarkets.bnpparibas.com