Market Mover - BNP PARIBAS - Investment Services India

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10Y Germany: ST bottoming/up tone from critical 3.09/3.12 area MT Trend: Bottoming/Up Range: 3.17/3.35 Technical pullback extended below key 3.193 (old MT 61.8%) to reach key 3.093/127 (October low & MT slight rising channel support) from which it is trying to rebound This area should be the base for resumption of previous MT weak bias (theoretical target is 3.70) but decisive breaks above 3.307 (61.8%) & then 3.37 MT falling resistance) are needed to be confirmed with a break above 3.433 (top) 3.093/3.108 ⇐ 3.127 ⇐ 3.193 –!– 3.307 ⇒ 3.37 ⇒ 3.433 ⇒ 3.498 Tech Snapshot - Rebound from key 3.093/3.127 (October low & MT rising channel support) - Bottoming/up around key MT 61.8% (3.193) Strategy: Short 3.20/23 stopped 3.15. Reenter short within 3.15/20 for 3.45/70. S/L below 3.09 UK 10y: Pullback on 3.80 may be over given ST flag resistance break MT Trend: Up Range: 3.90/4.15 Break above 3.78 (MT falling channel res) a month ago strengthened the MT rising scenario towards 4.30/4.50 theoretical target area but it stalled around key 4.084 (June 09 top) & then developed a technical pullback on 3.80 area. This move seems over & MT rise should now resume given break above 3.942 (ST falling channel res) although a decisive break above 4.084/114 (tops) is needed to rekindle previous MT up bias 3.644 ⇐ 3.723 ⇐ 3.78 –!– 4.001 ⇒ 4.084/114 ⇒ 4.248 ⇒ 4.559 Tech Snapshot - 3.78 (MT falling channel res) broken - Stalled on 4.084 (wave “A” top) - ST falling flag (3.756/3.944) breakout Strategy: Retried short within 3.80/3.85, S/L 3.74, for 4.10/4.50 S&P: Question is: is corrective wave “4” over as target stays at 1000? MT Trend: Consolidative/up Range: 1040/1100 Break below MT rising wedge support & ST rising channel support (1170) opened the ST way down towards 1009 (theoretical target & 6-months’ 61.8%). As it is rebounding from ST 38.2% (1043), the question is whether corrective wave “4” is over. There are now 3 possibilities. First is to continue the fall directly to 1000 target area. Second is to see a ST rebound before it falls again (ABC) to reach this 1000 area. Third is that the wave “4” is over & wave “5” is now starting for key 1228 (LT 61.8%). For the time being, we think the risk lies between the first two 965/976 ⇐ 1010 ⇐ 1043 –!– 1095 ⇒ 1110 ⇒ 1150 Tech Snapshot - MT rising wedge break - ST rising channel break Strategy: Wait for a rebound around 1100 /10 to try a short again S/L 1130 for 1010/40 Christian Sené 12 February 2010 Market Mover, Non-Objective Research Section 36 www.GlobalMarkets.bnpparibas.com
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. Current* Targets Stop Entry Closed Strategies Sovereign CDS Buy SovX 5Y Trade closed (10/2). PnL: EUR +76k. Existing Strategies Yield Curves USD Butterfly Pay USD 2M-fwd 2y3y5y Near low end of historical range. We are positioned for a Fed on hold and this is an ideal hedge. Negative carry/roll is less in forward than spot. Money Markets Euribor Spread Buy ERM0M1 Front curve on tech support and unch ECB with Eonia normalisation now fully priced in. Euribor Basis Buy ERM0 Basis OIS/Bor spreads are at very interesting entry levels compared to the evolution of CDS and other risk indicators. Moreover, ECB liquidity volatility should be supportive of this strategy. Eurodollar Spread Buy EDZ0Z1 The hawkish FOMC statement should lead to higher rate hike expectations, and the recent flattening in whites/reds on flight-to-quality concerns provides a decent entry point. Spread rolls up from Dec/Dec to Sep/Sep. -30.0 (S) 48.0 (T) 26.0 (S) 143.0 (T) 120.0 80.0 88.75 (29-Jan) -5.0 -38.0 -27.75 (15-Jan) 65.0 45.0 55.0 (29-Jan) 40.0 20.0 24.0 (29-Jan) 180.0 130.0 146.0 (27-Jan) Options Bund Spread Buy RXH0 Mar 122/12150 PS 10.0 25.0 0.0 8.5 Monthly option strategy playing a pull-back to the lows of the MT channel. Also, 12350 strong resistance area should hold. (T) (03-Feb) Euribor Fly Buy ERU0 9862/75/87 P 1.5 12.5 0.0 1.5 Cheap downside strategy, playing the normalisation of Eonia. The position (S) (13-Jan) complements the upside fly (no-normalisation strategy). Euribor Fly Buy ERU0 9912/25/37 C 1.5 12.5 0.0 1.5 Upside protection in case of liquidity spill-over post June. Rolldown trade. (S) (12-Jan) Eurodollar Call Buy EDU0 99.25 C 29.0 50.0 0.0 23.5 Expectations for a Fed on hold make rolldown strategies attractive. In this case, the (T) (08-Jan) theta loss over 3m or 6m is more than compensated by the rolldown in an unchanged scenario. Sterling Fly Buy L Z0 9900/25/50 C 6.0 25.0 0.0 3.5 Rolldown strategy for unchanged MPC thru 2010. (S) (05-Jan) *Tactical (T) and strategic (S) trades. **Risk: vega, gamma for options, or ΔDV01 for futures, bonds and swaps. Carry / mth Risk** P/L (ccy/Bp) 5k/01 EUR +76k +15bp 15k/01 USD -34k -2bp 6.25k/01 EUR -44k -7bp 5k/01 EUR +10k +2bp 10k/01 USD -30k -3bp 1.2k/01 EUR +1.5k +1.5c 10k/01 EUR 0k 0bp 10k/01 EUR 0k 0bp 5k/01 USD +28k +5.5c 5k/01 GBP +13k +2.5c Interest Rate Strategy 12 February 2010 Market Mover, Non-Objective Research Section 37 www.GlobalMarkets.bnpparibas.com
Page 1 and 2: Market Economics | Interest Rate St
Page 3 and 4: gave a few specific details on the
Page 5 and 6: More clarity was given on the seque
Page 7 and 8: Sovereign Debt: Time for Europe to
Page 9 and 10: The PS is more likely to face in th
Page 11 and 12: outlook for GDP and inflation. So h
Page 13 and 14: On inflation, Riksbank’s language
Page 15 and 16: Spending on other areas never did i
Page 17 and 18: would argue that resolving this iss
Page 19 and 20: Ramifications for Rates, Swap Sprea
Page 21 and 22: EUR: Demand for ECB’s Liquidity S
Page 23 and 24: EUR: Peripheral ASW Curves Re-Steep
Page 25 and 26: JGBs: Wait for Price Dips in Q2 •
Page 27 and 28: Table 1: BNP Paribas' Inflation For
Page 29 and 30: Table 3: BNP Paribas' Inflation For
Page 31 and 32: Table 1: BNP Paribas Carry Analysis
Page 33 and 34: Update on curves 5/10y indices’ c
Page 35: Technical Analysis - Interest Rates
Page 39 and 40: leave the euro significantly lower.
Page 41 and 42: open for further measures if requir
Page 43 and 44: EUR/SEK has broken sharply lower th
Page 45 and 46: Economic Calendar: 12 - 19 February
Page 47 and 48: Key Data Preview 115 105 95 85 75 6
Page 49 and 50: Key Data Preview Chart 5: Italian G
Page 51 and 52: Key Data Preview Source: Reuters Ec
Page 53 and 54: Key Data Preview Chart 13: Norwegia
Page 55 and 56: Key Data Preview Chart 17: UK Retai
Page 57 and 58: Economic Calendar: 15 February - 12
Page 59 and 60: Next week's T-Bills Supply Date Cou
Page 61 and 62: Economic Forecasts GDP Year 2009 20
Page 63 and 64: Market Coverage Market Economics Pa

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