Investment Research
02 October 2013
Position update EUR: book profit on 2Y2Y/15Y15Y steepener The position was open through two entries. The first ½ position was opened on 9 July @ 152bp and the final ½ position was opened on 4 Sep @ 118bp. Average entry 135bp. The position is closed at an average level of 150bp including roll-down and we therefore book a profit of 15bp on the full position.
Belly at risk following ECB meeting The ECB statement was more or less a repeat of the previous statement. The overall impression from today’s ECB meeting was that the central bank delivered a slightly less dovish message than anticipated. Draghi was not overly worried about deflation risks, a strengthening euro or the ongoing deleveraging in the financial sector and the impact from the next year’s Asset Quality Review. In our view, the ECB adds no support to the belly and given the latest rally in the 0-5Y segments of the curve, we judge it as prudent to book some profit at this stage. This leaves us with recommendations for open spread tightening in 5y5y USD-EUR swaps as well as a US Vol. conditional 2-5 flattener. We keep these recommendations open as we believe they will continue to offer potential over the coming months. See table of recommendations overleaf. Generic 2Y2Y/15Y15Y spread
Source: Danske Bank Markets
Senior Analyst Peter Possing Andersen +45 4513 7019 pa @danskebank.dk Senior Analyst Lars Tranberg Rasmussen +45 4512 8534
[email protected] Analyst Anders Vestergård Fischer +45 4513 66 41 afis @danskebank.dk
Important certifications and disclosures are contained from page 3. www.danskeresearch.com
02 October 2013
Position update
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Open and closed strategies in 2013: performance of closed trades – hit ratio 87% on 15 trades Instrument, currency and position Type Ccy Scaling Trade Idea 2 Vol USD ½ Buy 6M2Y, sell 6M5Y payerVol spike, 2/5 to steep 1 Swap USD-EUR ½ Rec 5Y5Y USD-EUR spread Elevated level
Current strategies Risk Not. Dv01 USD55m/USD23m USD0k* EUR7.2m/USD10.2m EUR3.2k
Entry 58ticks 138bp
Now 39.3ticks 112bp
Key levels for position Add risk Loss Profit 116ticks -58ticks 160bp 180bp 75bp
Closed strategies during 2013 Risk measures
Instrument Scaling Trade Red 2y2y, Pay 15y15y ½ Red 2y2y, Pay 15y15y ½
Open date 28-Aug-13 19-Jul-13
-
Type Swap
Ccy EUR
15
Swap
EUR
14
MM
USD
½
Buy Jun'16, sell Jun'15 Euro$
13
Vol
EUR
½
Sell 6m 5y payer, ATM+25bp
Fade sell-off - elevated vol
12
Vol
USD
½
Sell 6m 10y straddle, ATM
Elevated vol
11
Vol
USD
½
Sell 3m 5y payer, ATM+15bp
10
Vol
EUR
½
-
Swap
EUR
½
9
Swap
EUR
8
Swap
EUR
Horizon 3-6M 3-12M
P/L Bp/ticks EUR, k 18.7bp 33.4 26.2bp 83.7 P/L
Key dates
Idea Adding to position
Notional EUR 13.5m/EUR 3.2m
Dv01 EUR2.6k
Long-end steepener
EUR13.4m/EUR3.0m
EUR2.6k
MM curve to steep
250 contracts
USD 6.3k
EUR27.8m USD5.1m
Elevated vol, elevated rates
USD 30.5m
Sell 6m 5y payer, ATM
Fade sell-off - elevated vol
EUR 16.8m
Rec 2y 1y EUR
Adding to position
EUR 45.4m
EUR 4.5k
½
Rec 2y 1y EUR
Attractive roll-down
EUR 45.4m
½
Pay 2/5/10 Fly, 6m fwd
Steeper EUR currve
EUR 34.5m/28m/7.5m
Open date 04-Sep-13
Key levels
Simple
Entry lvl Close lvl 118bp 146bp
Bp 28
Close date 02-Oct-13
# Days 28
09-Jul-13
02-Oct-13
85
152bp
156bp
4
9
28-Aug-13
30-Sep-13
33
113bp
96bp
17.0
78
09-Sep-13
19-Sep-13
10
29ticks
78
28-Jun-13
19-Sep-13
83
510ticks 362ticks 148ticks
66
09-Jul-13
17-Jul-13
8
81ticks 38.5ticks 42.5ticks
108
25-Jun-13
09-Jul-13
14
119ticks 57ticks
62ticks
104
13-Jun-13
20-Jun-13
7
0.925% 1.210%
-28.5
-128
EUR 4.5k
04-Jun-13
20-Jun-13
16
1.050% 1.210%
EUR6.9k
08-Mar-13
13-Jun-13
97
72ticks 43ticks
EUR, k 72
-16.0
-72
-23bp
-17bp
6.0
41.4
6bp
18.5bp
12.5
154
-
Swap
EUR
½
Pay 1y1y vs Rec 1y
Adding to position
EUR 121.9m/120.9m
EUR12.3k
02-May-13
30-May-13
28
7
Swap
EUR
½
Pay 1y1y vs Rec 1y
Steeper EONIA curve
EUR 121.9m/120.9m
EUR12.3k
10-Apr-13
30-May-13
50
10.25bp 17.8bp
6
Swap
EUR
½
Pay 5/15/30 Fly, 10Y tails
Long end steepener
EUR 4m/10.7m/8m
EUR3.4k
11-Jan-13
08-Mar-13
56
-15.5bp
5
Swap
EUR
½
Pay 5y5y/10y10y spread
Long end steepener
EUR22.8m/14.1m
EUR10.1k
08-Feb-13
21-Feb-13
13
39.5bp
4
ASW DEU-EUR
½
Buy Bund ASW
Risk-off hedge
EUR6.8k
07-Jan-13
28-Jan-13
21
19.4bp 25.4bp
3
Swap
EUR
½
Rec 3y1y
Attractive roll-down
EUR40.1m
EUR4.0k
10-Jan-13
28-Jan-13
18
1.195% 1.535%
2
Swap
EUR
½
Rec 3y1y, pay 2y1y
Carry with protection
EUR67.2m/66.9m
EUR6.7k
07-Dec-12
17-Jan-13
41
44bp
33.5bp
10.5
70
-
Swap
USD
½
Pay 10y10y
Adding to position
USD5.1m
EUR2.7k
25-Sep-12
21-Feb-13
149
3.40%
3.95%
55.0
150
1
Swap
USD
½
Pay 10y10y
New Fed regime
USD5.1m
EUR2.7k
14-Sep-12
07-Jan-13
115
3.63% 3.745%
11.5
32
Source: Danske Bank Markets
7.6
93
-3.5bp
12.0
40.8
49bp
9.5
96
6.0
40.8
-34.0
-133
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Position update
Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’). The authors of the research report are Peter Possing Andersen (Senior Analyst), Lars Tranberg Rasmussen (Senior Analyst) and Anders Vestergård Fischer (Analyst). Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst’s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’ rules of ethics and the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank’s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors upon request. Risk warning Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text. Date of first publication See the front page of this research report for the first date of publication.
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