MARKET MOVER - BNP PARIBAS - Investment Services India

More documents

Recommendations

Info

This section is classified as non-objective research Trade Reviews Options, Money Market and Bond Trades – Tactical & Strategic Trades This 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. Closed Strategies BUY Germany 5y CDS BUY Position stopped on 18/09. P&L: -150k Receive EUR 5y5y swap. Pay USD 5y5y swap. Position closed on the stop win on 20/09. P&L: +150k Current Strategies Outright JPY long JL135 swap spread BUY With the 5y JGB yield at 23bp, long-end ASWs should attract demand as a carry position. Yield Curves JPY fwd swap steepener REC 1y1y/2y1y spread (versus six-month Libor) is historically low. Current* Targets Stop Entry . (S) . (S) L+14.8 (S) Inflation Long (pay fixed, receive inflation) 10y HICPxT BUY 2.15 (T) Options JPY: 2y2y/2y5y volatility ratio SELL The upper left-hand corner looks rich on the volatility matrix and there are some signs of overshooting. 1 (S) -340k (S) 80/85 49 56.5 (23-Aug) 20bp 10bp 5bp (06-Sep) L+0 L+16 L+11 (23-May) 10 -1 3 (23-May) 2.15 2.00 2.09 (04-Sep) 2300k -1500k -200k (13-Sep) *Tactical (T) and strategic (S) trades. **Risk: vega, gamma for options, or ΔDV01 for futures, bonds and swaps. Carry /month Risk** 20k 30k JPY 500k JPY 500k P&L (ccy/bp) EUR -150k EUR 180k JPY -1900k JPY -1000k 0bp 20k EUR 120k JPY1.7mn per 10% relative vega JPY -140k Interest Rate Strategy 20 September 2012 Market Mover 36 www.GlobalMarkets.bnpparibas.com
This section is classified as non-objective research CAD: A Leader in the Commodity Bloc • Fed and ECB policy will remain supportive of the CAD. • The BoC is likely to hike rates in mid-2013. • USDCAD is heading for a low of 0.92 by Q3 2013. Chart 1: US GDP vs. Canadian GDP The commitments by the Federal Reserve and the ECB to support the markets suggest that a risk rally is set to ensue for the unforeseeable future. The Fed intends to keep US interest rates low until mid-2015 and buy bonds until the US economy improves and unemployment declines. The ECB will help to reduce risk premia in the eurozone by buying the short-dated government bonds of the peripheral countries once they sign up to an EFSF/ESM programme. With the central banks almost suppressing volatility in the markets, the environment bodes well for risky assets. We are most bullish on commodity currencies into year end, but expect the CAD to outperform its peers into 2013. We believe USDCAD is likely to drift to 0.9200, a new low, by mid-2013. Source: Reuters EcoWin Pro, BNP Paribas Chart 2: USDCAD vs. USD-CAD 2yr Swap Ratio The Fed and ECB policies allow investors to pile into higher-yielding assets. The Fed’s policy stance, in particular, ensures that the USD will once again become the funding currency of choice. USD weakness is set to take hold until the Fed stops purchasing bonds at the end of 2013 or in mid-2014. Open-ended QE may translate into a USD1-1.5trn expansion of the Fed’s balance sheet, making it one of the most aggressive central banks on the stimulus front. The Fed’s goal to get the economy back on track bodes well for those economies most dependent on the US, not least Canada. With 70% of Canadian exports destined for the US market, the likely improvement in consumption in the US should boost growth in Canada. Indeed, we expect Canadian exports to outpace imports heading into 2013, not only because of the improvement of both the US and the global economy, but also the rise in oil prices. The Fed’s stimulative policy will push up oil prices, improving Canada’s terms of trade as an exporter of oil. After Q3, exports are expected to make a positive contribution to Canadian growth. Source: Reuters EcoWin Pro, BNP Paribas Chart 3: CAD TWI vs. Brent While Fed policy is crucial to the outlook for the CAD, the domestic backdrop also remains supportive. Business investment, which has been a key contributor to growth, thanks to investment in mining, should continue to expand at a solid pace. In addition, personal consumption is likely to grow near Source: Reuters EcoWin Pro, BNP Paribas FX Strategy / Mary Nicola 20 September 2012 Market Mover 37 www.GlobalMarkets.bnpparibas.com
Page 1 and 2: Market Economics | Interest Rate St
Page 3 and 4: Spain set to present its new budget
Page 5 and 6: The methodology All of the above in
Page 7 and 8: Ireland: What to Expect When You Ar
Page 9 and 10: Spain: Inching Closer to a Request
Page 11 and 12: UK Inflation: No Pressure • UK in
Page 13 and 14: US Housing: New Channels for Policy
Page 15 and 16: Japan: The Eastern Fiscal Cliff •
Page 17 and 18: an agreement that all budget-relate
Page 19 and 20: This section is classified as non-o
Page 33 and 34: Table 1: BNP Paribas' Inflation For
Page 35: Table 3: BNP Paribas' Inflation For
Page 43 and 44: Economic Calendar: 21 - 28 Sep (con
Page 45 and 46: Key Data Preview Chart 1: UK Cumula
Page 47 and 48: Key Data Preview Chart 5: German He
Page 49 and 50: Key Data Preview Chart 9: German ES
Page 51 and 52: Key Data Preview Chart 13: Japanese
Page 53 and 54: Key Data Preview 7000 6500 6000 550
Page 55 and 56: Treasury and SAS Issuance Calendar
Page 57 and 58: Central Bank Watch Interest Rate EU
Page 61: For Production and Distribution, pl

MARKET MOVER - BNP PARIBAS - Investment Services India

Create successful ePaper yourself

Delete template?

Save as template?