Eurozone spreads: OATs expensive vs both swap and Olos. 5. A rise in net government bond supply in France in September i
The end of the summer lull In this week’s Global Rates Plus: 7
Key views and trades for the week
2
UK: Risks skewed toward further 30s50s curve steepening
Global: The end of the summer lull
3
In September, gross gilt supply less coupons and APF re-investments will be most positive in 15y+ paper and most negative in shorter than 7y maturities. 8-9 US: Higher UST net supply with Fed SOMA reduction in sight
As supply conditions turn less favourable and with core inflation likely to rise, we expect the prospect of the Fed’s normalisation of its balance sheet and of ECB QE tapering in 2018 to lead to a rise in bond yields. 4 Eurozone: Rally is over, but it’s too early to turn very bearish We expect most of an autumn sell-off in bonds to be the result of more hawkish expectations regarding monetary policy, so the curve is likely to steepen up to its belly. The 5y is therefore the most exposed, in our view. 5 Eurozone spreads: OATs expensive vs both swap and Olos A rise in net government bond supply in France in September in contrast to a fall in Belgium is likely to lead to a widening of the OAT-Olo spread, in our view. This is particularly the case as OAT-Olo spreads tend to widen when spreads to Bunds widen in general, which is what we expect this autumn. 6
EUR non-core: Enter BTP 10s30s tactical steepeners
We recommend entering a tactical BTP 10s30s steepening trade due to upcoming seasonal steepening patterns, demand dynamics and positive carry.
We continue to expect a higher and steeper US rates curve to 10 years with a likely upcoming announcement of a change in Fed SOMA reinvestment policy at September FOMC. USD 14bn 5y TIPS supply should allow the 5y TIPS to cheapen in the curve from rich levels.
RATES FOCUS UK: Till death us do part
The private pension fund deficit has narrowed to its lowest level since October 2014. A continued narrowing could see demand for long-end and index-linked gilts fall, potentially leading to a steepening of curves.
Treasury and SAS issuance calendar, ECB QE tracker, selected 11-25 published articles, trade review, contacts & disclaimers Upcoming eurozone rating reviews: 18 August: Greece (Fitch), Belgium (DBRS), Ireland (DBRS) 25 August: Slovenia (Fitch), Finland (DBRS) 1 September: Germany (Fitch), Portugal (Moody’s) 8 September: Slovenia (Moody’s)
Please refer to important information & authors at the end of the report
10
Europe
Key views and trades for the week View and direction
Trade
Duration
The last leg of the bond rally seems over. We see the rally as a correction in a bear market and continue to target a rise in 10y Bund yield to 60bp by end-Q3 and 80bp by the end of 2017.
Long EUR 1% 2m10y payer swaptions.
Curve
We expect the 3m/5y segment to steepen back and the core and swap 10s30s sectors to flatten in H2 2017. The OAT curve is the most attractive to position for flattening, in our view.
Spread
The BTP 10s30s sector has entered its seasonal steepening period. A 2y BTP/Bono widener is a cheap risk-off hedge, in our view. 10y OATs are back to their richest 2016 level versus swap; we expect them to cheapen in coming months.
Pay EUR 5y swap BEI vs 10y swap BEI (0.75x1), targeting 75bp. Keep long OATi Mar-25 versus OATei Jul-24, targeting 5bp. Keep long SPGBei-24 real/nominal ASW discount.
MBS
We expect the change in MBS reinvestment policy to widen the basis from September, as MBS demand vs supply conditions deteriorate as a result of the Fed’s balance sheet normalisation.
Neutral on the basis in the near term, with continued liquidity support from the Fed, increasing REIT demand and low volatility. We target a 10-20bp widening of the MBS basis in 2018.
Duration/ Curve
Risk of higher supply, no QE and political uncertainty supports 10s30s steepening.
Keep 10s30s gilt curve steepener, targeting 80bp.
Spread
10y ASWs continue to look rich versus the level of rates. With the risk of higher gilt issuance, and as ASWs have lagged the widening in GC-Libor spreads, we favour 10y ASW shorts.
Stay short 10y gilt ASW at -5bp, targeting 10-15bp cheapening.
Inflation
The 5s10s RPI swap curve is too inverted, in our view. Long UK versus EUR real yield positions continue to look attractive – expect the spread to widen further with diverging monetary policy.
Keep 5s10s RPI swap breakeven steepener, targeting 15bp.
Duration
The BoJ looks reluctant to reduce its ‘rinban’ operation to the pre-July level.
Marginally long.
Curve
The 5y swap appears cheap versus Libor fixing. 30y JGB is struggling to perform.
Long swap 2s5s10s.
Spread
Medium-term USD/JPY cross-currency basis has room to tighten under tight US credit spread.
Short 6y swap spread. Short 10y swap spread. Look to pay 5y xccy basis.
Volatility
Vol at the short maturity tenor tail is cheap, in our view.
Duration/ Curve
We expect front-end yields to remain stable in the near term, with the RBA firmly on hold.
Enter 1s3s flattener at 29bp, target 15, stop 34. Close 2y1y/3y1y steepener and keep 5s10s steepener.
Spread
Front-end spreads versus the US have started to correct after the short squeeze. We expect further narrowing to be gradual.
Keep long 10y swap spreads.
Duration Curve
US
Spreads Vol
UK
Inflation
Japan
Enter tactical 10s30s BTP steepener. Pay 2s5s10s 2y fwd and sell 7s in the 4s7s12s Bund fly. Keep 10s30s structural flattener through OAT curve and 4s5s PGB flattener. EUR 40y10y vs receive 30y10y. Short OAT Apr 26 vs swap. Stay short 2y BTP vs 2y Bono. Stay long Olo June 26 vs OAT May 26. In non-core, we switched from 2s5s BTP trade into 2s5s BTP/Bund box.
The EUR 5s10s BEI curve now looks flat relative to the level of 5y BEI. We favour being long FRF versus EUR Rys with further flows expected into Livret A. Spanish IOTAs look cheap. With Fed funds on hold (until March our economists expect) and the Fed likely to announce its balance sheet reduction in September, we expect a higher and steeper curve to 10y. Stalled rate hike cycle and balance sheet reduction to allow curve to steepen from flat levels. Forward curve looks very flat versus EUR curve and forward inflation expectations. We expect wider swap spreads with T-bill stock to fall into debt ceiling discussion, potential for GC to richen vs Libor and with the money market curve (too) flat from 2018. With the Fed normalising its balance sheet and the ECB likely to taper its quantitative easing, vol is likely to bottom. 5y TIPS look very rich in the 2s5s10s real yield fly ahead of 5y TIPS supply in August. Real fly offers bearish exposure (underweight belly) with positive carry.
Inflation
V
AUS
Keep 1y1y eonia swap payer.
Keep ED z7/m8/z8 fly with +8bp roll over 3 months. Keep 2y fwd 2s5s steepener targeting 40bp, which offers +0.5bp carry per month. Keep US/EUR 5y5y/10y10y box at -42bp, targeting -20bp, with -1bp roll per month. Long 2y UST vs swap targeting a move to 30bp, with +0.8bp carry/month, Keep 1y10y +25bp/+75bp payer spread. Keep short 2s5s10s TIPS real yield fly positions, targeting -10bp. New stop at -34bp.
Source: BNP Paribas
2
Global: The end of the summer lull Yield lows are behind us, in our view. The summer rally in bond markets was stronger than we had expected, partly due to an increase in geopolitical tensions between the US and North Korea. However, the risk-off rally in bonds has quickly reversed in recent days on an easing of geopolitical tensions, supporting the view that the low in yields has already been seen. (The 10y Bund yield fell to a low of 38bp against our forecast of 45bp while the 10y US Treasury fell to 2.19% against our forecast of stability around the 2.25% level in the first half of August.)
Core inflation: US has bottomed, EUR and UK to rise further
Supply conditions to turn less favourable. Supply will be limited in coming weeks. However, with risk assets rebounding sharply, we expect bond markets to start to price in – both versus swap and outright – the sharp shift in supply dynamics from August to September. Core inflation is likely to rise. After being weaker than expected in recent months, our economists forecast the US core inflation rate to rise, along with a further rise in eurozone and UK core inflation (top chart). A rise in inflation is likely to be accompanied by an adjustment in monetary policy expectations in the US and the eurozone where, respectively, only 30bp and 7bp of rate hikes are priced in by late 2018. Such a repricing will weigh on the belly of each curve.
Source: BNP Paribas
Short- and long-term Bund models: Room for yields to rise
Valuations look overstretched. US 10y Treasuries and 10y Bunds remain at overstretched levels ahead of a likely one-off reduction in the ECB’s monthly asset purchase programme from EUR 60bn to 30bn in 2018 and the start of the Fed’s balance sheet normalisation. The Fed US 10y term premium has fallen from a peak of +25bp to -25bp currently while our model’s fitted level for the 10y Bund yield, consistent with the end of the APP, is around 1.10-1.20% (lower chart), well above its current level. Thus, in addition to our recent trades (pay EUR 2y fwd 2s5s10s, short OAT 10y ASW and US 2s5s10s TIPS barbell) we have added two new trades: Short the 5y Obl (re-entering the short closed in mid-July). A 10s30s BTP steepener ahead of the resumption of EGB supply in September. Eric Oynoyan, BNP Paribas London branch
Source: BNP Paribas
3
Eurozone: Rally is over, but it’s too early to turn very bearish A ‘real’ rally. The rally that dragged the 10y Bund yield down by more than 20bp between mid-July and mid-August was led by nominal yields’ ‘real’ component which fell by more than 20bp. The inflation breakeven remained fairly stable. The recent fall in real yields has been supported by a number of factors including negative net supply and seasonal factors. Geopolitical concerns (tensions between the US and North Korea) also fuelled the last leg of the rally but the latter quickly reversed. We expect a gradual return of bearish pressures. Going into early September, we expect supports to European government bonds (EGBs) to decline. Seasonal factors suggest some cheapening of core EGBs in ASW terms in late August and early September. Net supply, while still negative, will no longer favour lower real yields in September. But the most important negative factor is, in our view, likely to be a change in the ECB’s forward guidance at its September press conference (removing the reference to accelerating QE) followed by an announcement in October of a further scaleback of asset purchases in 2018. We expect the prospect of a fall in demand for EGBs next year to push yields up.
The rally was driven by a fall in real yields (%)
Source: BNP Paribas
The 5y OBL is the most exposed in a sell-off
The 5y area is the most exposed. As the bulk of the sell-off we expect is likely to be the result of more hawkish expectations regarding monetary policy, the curve is likely to steepen up to its belly. The 5y is therefore the most exposed. In addition to a cheapening of EGBs in ASW terms, this leads us to recommend selling the 5y OBL. With regard to the money market curve, the back end (ie, the 1-2y sector) has rallied in recent weeks in line with the global bullish tone. We expect paying interest to resume in coming weeks (only a 7bp deposit rate is priced in by December 2018’s meeting). We expect a continuation of the move that began at the start of this week to lead the 1y1y OIS back above the -0.20% area.
Sell 5y OBL October 22 now at -26bp and on any move to -32bp. Target: -10bp. Stop: -36. Carry & roll: -2.1bp/month.
Patrick Jacq, BNP Paribas SA
Source: BNP Paribas
4
Eurozone spreads: OATs expensive vs both swap and Olos OATs continued to outperform Olos unexpectedly in June, thanks to the latest OAT/Olo spreads have stabilised at tight levels wave of OAT buying flows from Asia. Since then, OAT/Olo spreads have stabilised around parity and even widened a bit on the 5y bucket (see top chart). We continue to consider Olos attractive versus OATs for the following reasons: - In the near term, the net supply in the two countries will face opposing dynamics in August and September: in France it will move from flat to positive, while it will turn more negative in Belgium, at close to EUR -7bn. - The correlation of OAT/Olo spreads with the general level of spreads to Bunds has turned positive since the end of 2016: ie wider spreads to Bunds have been consistently cheaper in OATs than Olos. We believe that with EGB spreads to Bunds having bottomed out, a rewidening this autumn should lead to wider OAT/Olo spreads. - Finally, even though it is not our central scenario, if the ECB decides to keep its EUR 60bn pace in 2018 in the event of disappointing inflation in H2, it would Source: BNP Paribas be very supportive for our long Olo vs OAT. Indeed, as the table, right, shows, Capital key vs debt outstanding PSPP: Belgium is the winner an ECB move from weighting by capital key to debt outstanding would have the Debt Outs. Weightings Cap Key W Debt Out vs Cap Key following impact on monthly purchases: for OATs, the increase in monthly Germany 17.4% 26.33% -34% purchases as a result of the new framework would be around 17%. By contrast, France 24.4% 20.74% 17% for Olos it would be around 51%. So Olos, along with BTPs, would be the main Italy 26.0% 18.01% 44% beneficiary of a parameter change in the ECB’s asset-purchase programme.
We keep our short OAT May 26 vs Olo June 26 entered on average at 3bp. Target: 12/15bp. Stop: –2bp. Carry: –0.1bp/month. Current: 0.5bp.
We keep our short OAT Apr 26 vs swap entered at –20bp, targeting –10bp in September and 0 by year-end. We would add on any move to –24bp. Stop: –26bp.
Eric Oynoyan BNP Paribas London branch
Spain Netherlands Belgium Austria Portugal Finland Ireland other
12.2% 5.1% 5.5% 3.3% 1.8% 1.3% 1.8% 1.2%
12.93% 5.86% 3.62% 2.87% 2.55% 1.84% 1.70% 3.55%
-5% -13% 51% 13% -28% -28% 7% -66%
Source: BNP Paribas
5
EUR non-core: Enter BTP 10s30s tactical steepeners The 10s30s BTP spread has evolved in a tight range over the past couple of months while the 2s10s BTP curve has bull flattened over past weeks, supported by the summer’s core market rally and the very negative net supply for Italy in August. We recommend entering a tactical BTP 10s30s steepening trade as we think that the segment will face some steepening pressures over the coming weeks for the following reasons:
BTP/Bund 10s30s box: Steepening from 2nd week of August
- As we stressed in our publication on seasonal patterns, ahead of a busy September supply, the BTP 10s30s segment has regularly steepened from the second week of August for a month ever since 2007 (top chart). - The 2s10s BTP segment is still very steep vs Bund and Bonos and is expected to normalise over the coming months. The OAT curve in H1 shows that when a very wide 2s10s box to Bund normalises it initially means steepening pressures on the 10s30s segment as the latter lags. - With non-resident holdings back to the late 1990s’ low level of the low 30’s and domestic investors short duration, any change of behaviour will mainly support the 10y bucket fuelling more steepening pressures.
Source: BNP Paribas
BTP 10s30s benefits from a 32bp positive 1y carry + roll
- Finally, to a lesser extent, as the adjacent table shows, the BTP 10s30s steepening trade benefits from almost 32bp of carry and rolldown over one year.
Trade: We recommend selling the BTP Mar 48 versus BTP June 27 now at 122.5bp. We would add on any richening to 118bp. Stop: 114bp. Target: 133/135bp in September. 1-month profit of carry: +0.8bp. Eric Oynoyan BNP Paribas London branch
Source: BNP Paribas
Source: BNP Paribas
6
UK: Risks skewed toward further 30s50s curve steepening The 30s50s gilt curve has already steepened 4bp this year as 30y yields have fallen. Risks look skewed for further 30s50s steepening, due to:
September 30s50s swap curve steepening (bp)
Uncommon occurrence of a (40y+) syndication in September. The only previous time a conventional gilt syndication took place in September (in 2011), the 30s50s curve steepened by 3bp through August and a further 6bp through September (although we note that this occurred during a bull steepening trend). Seasonal patterns. 87% of the time in the period 2007-2016 excluding 2009, the 30s50s swap curve steepened in September by 2bp on average (see the table below and top chart). Cashflows. Gross supply less coupons and APF re-investments will be most positive in 15y+ paper (GBP 5.1bn) and most negative in 30y) have only made up around 33% of long-end purchases during BoE QE and reinvestment operations.
Source: BNP Paribas
Parisha Saimbi, BNP Paribas London Branch
30s50s swap curve seasonal patterns andSeasonal statistics: 2007-2016 (excluding 2009) steepening patterns since 2007 (ex 2009) Month Month Jul Jul Sep Sep
Month Month Jun Jun Nov Source: BNPNov Paribas
Seasonal steepening since 2007 (ex Number 2009) of days Max steepening Max flattening Avg % of steepening Std. dev. Average move patterns Average steepening Avg % of 86 steepening Std. dev. Average steepening Number Max -3.6bp flattening 1.9bp 1.8bpmove Average2.3bp 15of days Max steepening 6.4bp 86 1.9bp 1.8bp 2.3bp 15 6.4bp -3.6bp 87 1.4bp 0.8bp 2.0bp 14 5.8bp -4.5bp 87 1.4bp 0.8bp 2.0bp 14 5.8bp -4.5bp
Avg % of flattening Avg % of80 flattening 80 77 77
Seasonal flattening patterns since 2007 (ex 2009) flattening since 2007 (ex 2009) Std.Seasonal dev. Average movepatterns Average flattening Number of days Max flattening Max steepening Std. dev. Average move Average flattening Number flattening Max steepening 1.9bp -1.0bp -1.8bp 13of days Max -6.8bp 3.0bp 1.9bp -1.0bp -1.8bp 13 -6.8bp 3.0bp 3.2bp -1.0bp -2.8bp 15 -7.9bp 6.3bp 3.2bp -1.0bp -2.8bp 15 -7.9bp 6.3bp
7
US: Higher UST net supply with Fed SOMA reduction in sight The July FOMC minutes suggested changes to the Fed’s balance sheet reinvestment policy at an upcoming policy meeting – with only “significant adverse developments” that could stand in their way. Nevertheless, the committee seemed increasingly uncertain over the prospects for inflation. We expect the FOMC to announce a change in Fed SOMA reinvestment policy at the 20th September meeting.
Net UST supply likely to increase over the remainder of 2017
The likely upcoming reduction in the Fed’s balance sheet will gradually transfer ownership of part of the Fed’s SOMA portfolio to the market. Whilst the initial and modest increase in Treasury funding needs could largely come from T-bills, net supply of UST will increase particularly from Q2 2018. Nevertheless, the profile of UST redemptions and our expectations for UST auctions should see significant net supply of USTs for the remainder of the year (top chart). We continue to expect a higher and steeper US rates curve until 10 years. With five disappointing CPI releases in a row, patience over Fed funds rate hikes is warranted, and the chance of a December hike have dropped to 44% (down slightly post-minutes), despite Dudley and Meister’s hawkish rhetoric. Our economists expect the Fed to remain on hold for the remainder of the year with the next rate hike coming in March 2018.
Source: BNP Paribas
EDM8 (Jun-18) offers most value in positioning for rate hikes
In Table 1, we show the Eurodollar curve vs. the schedule of FOMC meetings until the end of 2018. EDM8 (June-18) is our favoured short from a riskreward perspective. The Mar-18/Jun-18 (EDH8/M8) spread encompasses 3 FOMC meeting dates – 2 with a press conference – and is trading below 6bp (implying the lowest tightening per Fed meeting across the strip). We keep our short EDZ7/EDM8/EDZ8 fly recommendation, given our expectations for more rate hikes in H1 2018 rather than H2 2018, with inflation base effects (core and energy) and FX developments to support inflation and, therefore, prospects for tightening in H1. The fly is unchanged since entry but offers +8bp of roll in 3 months. Shahid Ladha, Timothy High BNP Paribas Securities Corp
Source: BNP Paribas
8
Inflation: 5y TIPS remain expensive into supply US Core CPI printed +0.11% m/m in July, whilst headline came in at 1.7% y/y with food and energy prices both unchanged on the month. US TIPS breakevens are down about 4bp on average since the release, but the market remains relatively resilient following the fifth consecutive, downside surprise to US inflation data.
5y TIPS breakevens tend to tighten into and out of auctions
The US Treasury will re-open USD 14bn of 5y TIPS Apr-22 next Thursday. The distinct lack of inflationary pressure in the US and our economists’ expectations for further weakness in core goods (apparel and vehicles) in August, low/negative seasonal TIPS carry and typical behaviour into and out of 5y TIPS auction are not supportive for US TIPS breakevens in the near term. As shown in the top chart, 5y US TIPS breakevens tend to tighten by 4bp into 5y TIPS auctions and 3bp out of 5y TIPS auctions (using a period of 20 days pre- and post-auction). The 5y area of the TIPS curve has richened with strong demand, and trades extremely special in repo. The lower chart of 2s5s10s real vs. nominal yield and inflation breakeven flies shows the 10bp+ richness of 5y TIPS in both real yield and inflation curves. The USD 14bn of 5y TIPS supply should allow the squeeze on 5y TIPS to abate allowing a cheapening of 5y TIPS in real and inflation curves. We continue to recommend selling 5y in 2s5s10s US real yield fly. Current: -26bp. Target: -10bp. Stop (new): -34bp. Carry: +2bp/month (estimated). Rationale:
Source: BNP Paribas, Bloomberg
5y TIPS rich in real and inflation ahead of August’s auction
Sharp outperformance of 5y TIPS in real and inflation curves since weak May, June and July CPI releases. Upcoming 5y TIPS supply does not look priced without a concession, at least in the curve. Bearish rates expression (underweight the belly) at attractive entry levels with positive carry (estimated at +6bp over 3months). Shahid Ladha, Timothy High BNP Paribas Securities Corp Source: BNP Paribas, Macrobond
9
UK: Till death us do part Private pension scheme deficits have narrowed. The private pension fund deficit (PPF 7800 Index) amounted to GBP 180.1bn at the end of July. While substantial compared to its long-term average, it is the smallest deficit since October 2014. The deficit fall in recent months is the result of a strong asset performance. Since the start of the year, pension funds’ assets have risen in value by GBP 48.3bn versus a GBP 4.5bn increase in liabilities (top chart).
PPF 7800 Index assets, liabilities and aggregate deficit
Other factors may also be supporting a narrowing of deficits:
Mortality assumptions. Following the Continuous Mortality Investigation’s latest prediction for life expectancy to shorten in the long term, LCP reports that 28 FTSE 100 companies have lowered their average life expectancy assumptions by six months. See our earlier note for more detail. Scheme transfers. According to a survey by Willis Towers Watson, the number of members transferring out of defined benefit (DB) schemes in January 2017 was around 10 times the monthly average between May 2013 and April 2014 before pension flexibility was announced. With 47% of DB scheme members deferred members, the scope for further transfers remains substantial.
Source: BNP Paribas
DB scheme contributions on the rise (GBP mn)
Contributions. Scheme contributions have been on an upward trend over the past year (lower chart). Should the size of contributions remain at Q1’s level for the rest of 2017, we would see a 12% y/y rise.
We expect these trends to persist as the industry continues to de-risk. DB schemes remain under-hedged, so demand for long-dated and index-linked gilts should remain robust. The concentration of this demand, however, could shift down the curve to slightly shorter maturities. Reduced life expectancy assumptions would reduce the duration of the liabilities to be hedged, while increases in scheme transfers would lower the size of liabilities to be hedged, ie, the PV01 of scheme liabilities should fall, all else equal. Consequently, this should see the 30s50s curve steepen over the long term. Parisha Saimbi, BNP Paribas London Branch
Source: BNP Paribas
10
Treasury and SAS issuance calendar Next week’s short-term supply Date 21/08 21/08 21/08
Country France Norway US
22/08 22/08
Spain Canada
24/08
Japan
Issues 3m, 6m and 12m BTFs T-Bill 20 Dec 2017 T-Bill 24 Nov 2017 T-Bill 22 Feb 2018 Letras T-Bill 30 Nov 17 T-Bill 22 Feb 18 (new) T-Bill 23 Aug 18 (new) T-Bill 27 Nov 17
Details EUR 6bn NOK 3bn USD 39bn USD 33bn 21 Aug CAD 5bn CAD 2bn CAD 2bn JPY 4.4trn
Next week’s redemptions and coupon payments Country Netherlands Total long-term coupon payments
Amount EUR 0.03bn EUR 0.03bn
Date
Day
Closing
21/08 22/08 23/08
Mon Tue 12:00 Wed 11:30 11:00 10:30 10:15 Thu 12:00 Mon Tue 12:00 11:30
Local
24/08 28/08 29/08
31/08
Thu
05/09 06/09
Tue Wed
07/09 12/09 13/09 13/09 13/09 14/09 14/09
Thu Tue Wed Wed Wed Thu Thu
11:00 12:00 11:00 11:00 11:30 11:00 10:50 11:30 11:00 11:30 10:30 10:00 11:00
Country
Issues
Details
BNPP forecasts
GMT
03:00 09:30 09:00 09:30 08:15 03:00 03:00 09:30 09:00 03:00 09:00 09:00 09:30 09:00 08:50 09:30 09:00 09:30 09:30 09:00 09:00
Lithuania Japan Germany Sweden UK Denmark Japan Lithuania Japan Germany Denmark Norway Japan Sweden Austria Germany Sweden France Germany Italy Germany UK Ireland Sweden
LITHGB 23 Aug 2024 (new) JGB 20-year Bund 15 Aug 2027 Bond Gilt 22 Jul 2023 (new) DGB JGB auction for enhanced liquidity LITHGB 1.1% 26 Apr 2027 JGB auction for enhanced liquidity Schatz 13 Sep 2019 (new) Exchange Offer DGB NGB JGB 2-year ILB Bond OBLs 7 Oct 2022 Bond OATs 7-year (or longer) DBRi BTPs Bund 15 Aug 2027 Gilt 07 Dec 2027 Bond ILB
JPY 1trn EUR 3bn SEK 1bn GBP 2.75 DKK 1.5bn JPY0.55trn 22 Aug EUR 5bn 28 Aug 28 Aug 24 Aug 24 Aug 29 Aug EUR 3bn 30 Aug 31 Aug 07 Sep 08 Sep EUR 3bn 05 Sep 11 Sep 07 Sep
EUR 1.1bn
EUR 6-9bn
GBP 2.5bn
All sources: Treasuries, BNP Paribas
Parisha Saimbi BNP Paribas London Branch
11
Treasury and SAS issuance calendar Supply pipeline
Gross/net EGB supply with and without PSPP (EUR bn)
We expect little supply next week, with Germany re-opening the newly issued 2027 maturity Bund for EUR 3bn. Coupon payments will be also be very small, EUR 0.03bn in the Netherlands. The lull in supply will persist for another week. Outside the eurozone, Japan will issue JPY 1trn of 20y debt, and the UK will re-open the new 5y paper (UKT 0T 23) for GBP 2.75bn. Parisha Saimbi, BNP Paribas London Branch
EGB gross supply breakdown by country (EUR bn)
EGB gross supply breakdown by maturity (EUR bn)
All sources: Treasuries, BNP Paribas
12
Weekly ECB QE tracker Eurosystem balance sheet According to the ECB, QE purchases settling last week amounted to EUR 11.5bn, less than the previous week’s amount.
Lending related to monetary policy operations in euro
However, since the start of the year, QE has been ahead of schedule (EUR 13bn at the end of July). This gives the ECB substantial room for manoeuvre.
773.5
MRO
The PSPP portfolio increased by EUR 9.7bn and the CSPP portfolio increased by EUR 1.1bn. Continued at the current pace, purchases for August would amount to between EUR 55 and EUR 60bn, slightly below the monthly target.
LIABILITIES
ASSETS
4.6
LTRO+TLTRO
Banknotes in circulation
1,145.9
Liabilities related to Monetary Policy Operations in euro
1,870.4
Current Accounts (covering the minimum reserve system)
768.7
1,240.9
Fine-Tuning Reverse
0.0
Deposit Facility
Structural Reverse
0.0
Fixed-term Deposit
0.0
0.2
Fine Tuning Reverse Operations
0.0
0.0
Deposits Related to Margin Calls
0.0
Marginal Lending Facility Credit Related to Margin Calls Securities of euro area residents in euro
2426.0
Securities held for Monetary Policy Purpose
2139.7
Other securities Others
286.3 1,056.5
4,256.0
Total Assets
629.4
Others
1,239.6
4,256.0
Total Liabilities
Sources: ECB, BNP Paribas
EAPP portfolio weekly split
Evolution of QE
Weekly split of the EAPP EAPP
4.9%
9.7%
0.8%
CBPP3
ABSPP
PSPP
CSPP
Total
226,142.0
24,809.0
1,680,689.0
104,493.0
2,036,133.0
Weekly Change
562.0
90.0
9,703.0
1,107.0
11,462.0
Daily average
112.4
18.0
1,940.6
221.4
2,292.4
Month-to-date
1,039.0
193.0
19,487.0
2,267.0
22,986.0
(EUR mn) 11-Aug
84.7%
CBPP3 Source: BNP Paribas
ABSPP
PSPP
CSPP
Level end of August (at current pace)
58,742.0
Source: BNP Paribas
13
Selected published articles Title Eurozone & Trading Opportunities – August update BTP 10s30s steepeners Sell 7s in German 4s7s12s fly, pay 2y fwd EUR 2s5s10s swap fly ECB QE Monthly Tracker: All-time high avg. monthly PSPP maturity; German bond purchases stable Sell OAT Apr-26 versus swap Buy 1% EUR 2m10y swaption payers Eurex roll analysis AFT August tap: Opportunity to buy 30y OATs ECB PSPP & German ASW update ECB PSPP: Market impact of duration management Time to sell Italy versus Germany ECB QE: Implications of PSPP tapering in 2018 US Rates Market Outlook May the Brexit begin What’s gone wrong with the bond bear market? Year-to-date supply, forecasts & spread outlook Cross-currency basis swaps: A primer BTP 2s5s flatteners PSPP: Who has been selling bonds to the ECB? Decoding Principal Component Analysis in vol PSPP: The case for further DV01 tapering in Germany EUR inflation: Breakevens to rise as carry turns positive Vols moving in different directions Euro and UK rates: Identifying seasonal patterns FRF inflation: Livret A update 2017 Rates Volatility Outlook Update: EFSF/ESM Greek debt relief plan to go ahead Global supply net of QE favours higher yields in 2017 French debt market handbook 2017 edition EUR/USD xccy basis in 2017 2017 Global Inflation Year Ahead 2017 US rates outlook 2017 US MBS outlook Pay EUR 40y10y swap vs swap 30y10y US: Libor, the money market and liquidity European pension fund update
Name(s) Eric Oynoyan Eric Oynoyan Agne Stengeryte Agne Stengeryte Eric Oynoyan Eric Oynoyan Eric Oynoyan Eric Oynoyan Eric Oynoyan Agne Stengeryte, Patrick Jacq Laurence Mutkin Agne Stengeryte Shahid Ladha, Timothy High, Sarah Hu Dominic Bryant, Parisha Saimbi, Sam Lynton-Brown, Ankit Gheedia Laurence Mutkin Camille de Courcel Camille de Courcel Eric Oynoyan Ioannis Sokos Camille de Courcel Ioannis Sokos Agne Stengeryte, Parisha Saimbi Timothy High, Camille de Courcel Eric Oynoyan, Parisha Saimbi, Agne Stengeryte Parisha Saimbi, Agne Stengeryte Camille de Courcel, Timothy High Camille de Courcel Ioannis Sokos, Daniel Totouom-Tangho, Reiko Tokukatsu, Parisha Saimbi, Altaz Dagha Eric Oynoyan Camille de Courcel Shahid Ladha, Parisha Saimbi Shahid Ladha Sarah Hu Eric Oynoyan Shahid Ladha, Daniel Totouom-Tangho IR Strategy
Date 16 August 2017 14 August 2017 9 August 2017 8 August 2017 8 August 2017 7 August 2017 7 August 2017 2 August 2017 19 July 2017 13 July 2017 10 July 2017 3 July 2017 30 June 2017 22 June 2017 19 June 2017 15 June 2017 31 May 2017 31 May 2017 10 May 2017 3 May 2017 27 March 2017 21 March 2017 21 March 2017 20 March 2017 8 February 2017 24 January 2017 24 January 2017 17 January 2017 6 January 2017 14 December 2016 8 December 2016 6 December 2016 6 December 2016 6 December 2016 15 September 2016 8 August 2016
Models 10y Gilt: Estimating the QE premium Model - USD cash RV reports 30y Bund ASW: Modelling update and strategy
Parisha Saimbi Daniel Totouom-Tangho Eric Oynoyan
30s50s modelling Basis
Eric Oynoyan Eric Oynoyan
Bund valuation
Camille de Courcel / Eric Oynoyan
8 September 2016 24 June 2016 5 April 2016 24 July 2015 18 Nov 2014 22 June 2015
14
Trade review Carry / mth
Risk**
P/L (ccy/Bp)
-26 (17-Aug)
-0.6bp
10k
EUR 0bp
114
122.5 (14-Aug)
0.8bp
10k
EUR 0bp
0
-0.28%
-0.20% (09-Mar)
-0.7bp
10k
EUR -10bp
-11 (S)
5
-19
-11 (09-Aug)
-0.5bp
10k
EUR 0bp
OAT 10s30s structural flatteners: Sell May 27 vs May 45 SELL Flattener to position for structural flattening of the 10s30s sector in H2 2017. Sell 7s in German 4s7s12s fly The 4s7s12s fly is a proxy for the 2s5s10s fly which is still in the pre-tapering regime. We believe the belly of the curve is likely to underperform significantly from when ECB tapering is announced until it ends (as was the case in the US).
95.5 (S) 3 (S)
80
99
-0.3bp
10k
13
-3
99 (11-May) 3 (09-Aug)
-0.5bp
10k
EUR +2.5bp EUR 0
Pay EUR 40y10y swap vs EUR 30y10y swap PAY The 40y10y/30y10y spread has decoupled from the 30s50s swap curve; periods of decoupling tend to be short-lived. 1y positive roll of +0.7bp. Add to the trade on any move to -38bp.
-32.5 (S)
-17/-15bp
-42
-34 (06-Dec)
--
10
EUR +1.5bp
Sell OAT Apr 26 vs swap SELL OATs have richened significantly since the French election, which was understandable given the excessively wide OAT/Bund spread. However, it has reached overstretched levels, in our view. We would add on any move to -24bp.
-19 (S)
-10
-26
-20 (08-Aug)
-0.8bp
10k
EUR +1bp
Sell BUXL ASW (rolled to U7) SELL The rewidening in BUXL ASW ahead of the French election has only slightly reversed and we expect the ECB to announce more 2018 tapering this autumn. We target a fall in the ASW back to the low 20s. Position rolled into U7 contract.
39.5 (S)
15/17
39
30 (20-Oct)
-0.1
10K
EUR -9.5bp
Sell OAT May 26 vs Olo June 26 SELL 10y OATs are back to very tight levels vs Olos. Supply and demand conditions and seasonal effects are supportive of Olos; we added to the trade at 1bp (average entry level +3bp).
+0.5 (S)
20
-2
3 (11-May)
-0.1bp
20k
EUR -2.8bp
BTP Apr 19/Bono Apr 19 spread widener SELL In contrast to 5y and 10y BTPs, the 2y BTP has performed well vs Bunds and Bonos. Domestic buying flows in Italy focus on the short end of the BTP curve supported by the TLTRO. With the very tight spread to Bonos, the unwinding of carry trades could affect the expensive 2y BTPs. We are adding to trade at 8bp with a stop at 4bp. 1-month carry: flat.
15 (S)
25
4
10.5 (29-Jun)
Flat
20K
EUR +4.5bp
2s5s BTP/Bund box compression trade (BTP Apr 19/Apr 22 vs BKO June 19/OBL Apr 22) SELL The box trade removes the directionality component. In the low 60s, we think it could correct half of its September 2016 to February 2017 widening move in H2 2017. Enter half now at +61bp and add to the position on any move to 66bp.
59.5 (S)
40
69
61 (09-Aug)
+0.3bp
10k
EUR +1.5bp
Europe
Current*
Targets
Stop
Entry
-26 (S)
-10
-36
122.5 (S)
133/135
Pay EUR 1y1y OIS swap PAY The EUR 1y1y eonia rate has started to adjust. With the ECB likely to turn more hawkish, we expect a further repricing of the forward eonia curve. Pay 2y fwd EUR 2s5s10s swap fly PAY In Europe, 2s5s10s is still in the pre-tapering regime: we believe the belly of the curve is likely to underperform significantly from when ECB tapering is announced until it ends (as was the case in the US).
-0.24% (S)
Outright NEW* Sell 5y OBL October 22 SELL The summer rally we had expected has occurred. We now expect a gradual rise in core yields with the repricing of the money market curve and the prospect of ECB QE tapering in 2018. Add to the trade on any move to -32bp. Carry plus roll: -2.1bp/month. NEW* BTP 10s30s steepener: Buy BTP June 27 vs BTP June 48 BUY Add to the trade on any move to 118bp. If the past is any guide, since 2007, the resumption of supply in September has always led to a steepening of the BTP 10s30s sector from the second week of August until early September. The trade also benefits from a significant positive carry and rolldown.
15
Trade review Europe
Current*
Targets
Stop
Entry
OT 4s5s spread: Sell OT Apr 21 vs OT Oct 22 SELL We believe that the current low volatility in equities, credit, FX and core yields could encourage non-domestic investors to return to 5y OTs where carry plus roll is high. New stop at 67bp.
65 (S)
50
67
67 (22-Jun)
Receive the 1m-4y OIS/BOR spread curve REC After the last TLTRO, OIS are exposed to paying interest as expectations of ECB rate hikes rise. Meanwhile, 2-3y BOR are unlikely to be paid.
18 (S)
15
28
24 (27-Mar)
EUR 6m30y vs 1y30y calendar spread PAY The 6m30y leg has expired, the position becomes a simple long 1y30y payer swaption leg. New target: 25bp.
15 (S)
25
4
7 (14-Feb)
BUY EUR 2m10y swaption payer 1% strike BUY The technical summer rally has occurred. With the very low volatility on 2m10y swaptions, the long OTM payer seems a safe trade, in our view.
3 (S)
12
0
4 (07-Aug)
1x2 2y5y ATM/ATM-32.5bp rec spread REC Use the flattening of the smile and position for a slow, bearish trend in yields. The trade is short rates, short vol. Maximum profit to be reached on a 20-30bp sell-off.
2 (S)
8
-3
0 (05-May)
Current*
Targets
Stop
Entry
Receive AUD IRS 1s3s flattener With risks to the RBA's economic forecasts still skewed to the downside, and an appreciating currency and carry trades keeping a cap on yields, we recommend positioning for a further flattening of the curve.
29 (T)
15
34
29 (03-Aug)
AUD 5s10s IRS steepener Mid-curve swap yields look high relative to the curve, following position unwinding and recent flows. We recommend 5s10s steepeners, which have positive carry.
40 (S)
60
30
38.5 (1-Dec)
Long 10y swap spreads Long-end swap spreads have broken out of their 12-month range in recent weeks after a steady rise. We think supply dynamics and other factors will keep swap spreads supported and widening.
18 (S)
36
17
23.75 (22-Jun)
Current*
Targets
Stop
Entry
Long 2y UST ASW BUY We recommend buying 2y bonds versus swaps in Treasuries, Bunds and Gilts.
25.5 (T)
30
15
21 (29-Jun)
2s5s US swap curve steepener, 2y fwd PAY The 2s5s curve, 2y forward curve is at its flattest level since 2008 having lagged the steepening in the spot curve, and the position carries positively.
22 (S)
40
10
17 (12-Jan)
US: Pay ED z7/m8/z8 butterfly Paying the ED z7/m8/z8 fly should benefit from reduced rate hike expectations in the second half of the 2017, and/or increased rate hike expectations in the first half of next year relative to the second half.
1 (S)
7
-5
US/EUR 5y5y/10y10y REC Rationale for a normalisation in US vs EUR forward swap curves includes, supply/demand and inflation expectations.
-37 (S)
-20
USD: Buy 1y10y atmf +25bp/+75bp payer spread BUY Targets our mid-2018 rate forecast (10y UST at 3.25%), assuming stable swap spreads, and pays only for the optionality we need.
12.5 (S)
USD: EDZ7 risk reversal (buy 98.25 put vs selling 99.00 call) BUY We like using options to position for an easing of the (geo)political premium at the front end of the curve.
0 (S)
Australia
US
Carry / mth 0bp
Risk**
P/L (ccy/Bp)
10k
EUR +2bp
+0.3bp
10k
EUR +6bp
+1
100mn
EUR +8bp
10K
EUR -1bp
100m
EUR +2bp
Risk**
P/L (ccy/Bp)
+0.5bp
Carry / mth 0.6bp
0bp
-0.2bp
+1.5bp
-5.75bp
Carry / mth +2.5bp/3m
Risk**
P/L (ccy/Bp)
25k
USD +5.8bp
0.9bp
50k/01
USD +11.5bp
-1 (27-Jun)
+1.6bp
25k/01
USD +2.0bp
-50
-42 (29-Jun)
-1bp
25k
USD +3.4bp
50
0
12 (01-Jun)
-1bp
25k/01
USD +0.5bp
10
-4
0.5 (20-Apr)
-0.1bp
50k/01
USD -0.5bp
16
Trade review Carry / mth -0.5bp
Risk**
P/L (ccy/Bp)
20k/01
GBP -4.9bp
+0.2
15k
GBP -2.5bp
Carry / mth -0.17bp
Risk**
P/L (ccy/Bp)
25k/01
GBP -1.0bp
43 (04-May)
0bp
15k
EUR +10bp
40
47 (03-Aug)
1.8bp
15k/01
EUR +1.8bp
5
17
17 (22-Jun)
15k
EUR +2.1bp
-25 (S)
-10
-38
-30 (27-Jul)
1.5/1.4/5.2 over 1/2/3 months 0/0.5/6
25k/01
USD +5.0bp
Current*
Targets
Stop
Entry
Risk**
P/L (ccy/Bp)
JPY swap 2s5s10s long The 5y swap has cheapened along with JGBs in response to the rinban reduction.
-8.4 (T)
-11.5
-7
-9.7 (22-May)
5
JPY 10y Tibor/Libor spread widener Seasonal trade.
6 (T)
10
4
6 (10-Aug)
0
5
Pay USD/JPY 5y USD/JPY Xccy basis spread Tighter US credit spread would imply tighter basis spread in the long term.
-62 (S)
-50
-70
-62 (10-Aug)
1
5
Buy JPY 6mx10y 10bp OTM strangle Buying for 6m tail risk.
33 (S)
60
0
35 (03-Aug)
-15
5
JPY -1.3bp JPY 0 JPY 0 JPY -2
UK Sell 10y gilt ASW SELL The seasonal sell-off pattern, low levels vs history, dislocation from the level of rates and expected lack of further BoE QE support this short position. 10s30s gilt curve steepeners BUY Given supportive supply-demand dynamics, we favour 10s30s gilt curve steepeners. Inflation 5s10s RPI swap breakeven steepener REC While the inflation rate will continue to rise near term, the 5s10s breakeven curve is trading close to its flattest level ever. Longer-end breakevens may find some support. Buy BONOSei-24 real/nominal ASW discount BUY Spanish ILBs look cheap versus nominals in ASW despite the recent risk-on mood, positive carry and supportive supply/demand dynamics in the near term. We move our stop-loss from 43bp to 38bp. 5s10s EUR HICPxt steepener (0.75x1 weights) PAY The 5s10s BEI curve now looks very flat relative to the level of 5y BEI. We recommend expressing this view by entering 5s10s BEI steepener hedged by a short 5y inflation. Long 10y FRF vs EUR real yield BUY We expect OATi bonds to outperform OATei in the coming months. We tighten the stop to -17bp. Sell 2s5s10s TIPS real yield fly (benchmark bonds) SELL 5y TIPS look very rich in the 2s5s10s real yield fly ahead of +0.12y index extension and 5y TIPS supply in August. Real fly offers bearish exposure (underweight belly) with positive carry. Japan
Current*
Targets
Stop
Entry
-10 (S)
5
-12
-5 (16-Mar)
66 (S)
80
60
69 (15-Jun)
Current*
Targets
Stop
Entry
0 (T)
15
-5
0 (23-Feb)
33 (S)
30
38
48 (S)
75
17 (S)
Carry / mth 0
*Tactical (T) and strategic (S) trades. **Risk: vega, gamma for options, or ΔDV01 for futures, bonds and swaps.
17
G10 Strategy contacts BNP Paribas London branch Laurence Mutkin
Global Head of G10 Rates Strategy
+44 20 7595 8639
[email protected]
Eric Oynoyan
Europe Strategist
+44 20 7595 8613
[email protected]
Camille de Courcel Parisha Saimbi
Europe Strategist Inflation and UK Rates Strategist
+44 20 7595 8295 +44 20 7 595 8351
[email protected] [email protected]
Agne Stengeryte
Europe Strategist
+44 20 7 595 8958
[email protected]
Europe Strategist
+33 1 4316 9718
[email protected]
BNP Paribas SA Patrick Jacq
BNP Paribas Securities Corp Shahid Ladha
Head of Strategy for G10 Rates Americas
+1 212 841 3656
[email protected]
Timothy High
US Strategist
+1 212 841 2842
[email protected]
Sarah Hu
MBS Strategist
+1 212 841 3713
[email protected]
+81 3 6377 1704
[email protected]
BNPP Securities (Japan) Reiko Tokukatsu
Relative Value Strategist
BNP Paribas Singapore branch Altaz Dagha
AU & NZ Strategist
+65 6210 4994
[email protected]
Production and distribution Amanda Grantham-Hill, London. Tel: 44 20 7595 4107 Email:
[email protected]; Anna McLauchlin, London. Tel: 44 20 7595 3754 Email:
[email protected] Louise Bylicki, New York. Tel: 1 212 471 6479
[email protected] Danielle Catananzi, London. Tel: 44 207 595 4418 Email:
[email protected]
18
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Legal notice BNPP may face conflicts of interest, which are resolved under applicable legal provisions and internal guidelines. You should be aware, however, that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in this document, either for its own account or for the account of its clients. This document may contain certain performance data based on back-testing, i.e. simulations of performance of a strategy, index or assets as if it had actually existed during a defined period of time. To the extent any such performance data is included, the scenarios, simulations, development expectations and forecasts contained in this document are for illustrative purposes only. All estimates and opinions included in this document constitute the judgment of BNP Paribas and its affiliates as of the date of the document and may be subject to change without notice. This type of information has inherent limitations which recipients must consider carefully. While the information has been prepared in good faith in accordance with BNP Paribas’s own internal models and other relevant sources, an analysis based on different models or assumptions may yield different results. Unlike actual performance records, simulated performance returns or scenarios may not necessarily reflect certain market factors such as liquidity constraints, fees and transactions costs. Actual historical or back tested past performance does not constitute an indication of future results or performance. This document is only intended to generate discussion regarding particular products and investments and is subject to change or may be discontinued. We are willing to discuss it with you on the understanding that you have sufficient knowledge, experience and professional advice to understand and make your own independent evaluation of the merits and risk of the information and any proposed structures. The information contained herein is not and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada, the U.S. or any other province or territory nor shall it be deemed to provide investment, tax, accounting or other advice. Transactions involving the product(s) described in this document may involve a high degree of risk and the value of such transactions may be highly volatile. Such risks include, without limitation, risk of adverse or unanticipated market developments, risk of counterparty or issuer default, risk of adverse events involving any underlying reference obligation or entity and risk of illiquidity. In certain transactions, counterparties may lose their entire investment or incur an unlimited loss. The information relating to performance contained in this document is illustrative and no assurance is given that any indicated returns, performance or results will be achieved. Moreover, past performance is not indicative of future results. Information herein is believed reliable but BNP Paribas and its affiliates do not warrant or guarantee its completeness or accuracy. All information, terms and pricing set forth herein reflect our judgment at the date and time hereof and are subject to change without notice. In the event that we were to enter into a transaction with you, we will do so as principal (and not as agent or in any other capacity, including, without limitation, as your fiduciary, advisor or otherwise). Only in the event of a potential transaction will an offering document be prepared, in which case, you should refer to the prospectus or offering document relating to the above potential transaction which includes important information, including risk factors that relate to an investment in the product(s) described herein. Prior to transacting, you should ensure that you fully understand (either on your own or through the use of independent expert advisors) the terms of the transaction and any legal, tax and accounting considerations applicable to them. You should also consult with independent advisors and consultants (including, without limitation, legal counsel) to determine whether entering into of any securities transactions contemplated herein would be contrary to local laws. The information contained herein is provided to you on a strictly confidential basis and you agree that it may not be copied, reproduced or otherwise distributed by you, whether in whole or in part (other than to your professional advisers), without our prior written consent.. Neither we, nor any of our affiliates, nor any of their respective
directors, partners, officers, employees or representatives accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or their content; and any of the foregoing may from time to time act as manager, co-manager or underwriter of a public offering or otherwise, in the capacity of principal or agent, deal in, hold or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to the securities or related derivatives that are discussed herein. BNP Paribas and its affiliates may (or may in the future) hold a position or act as a market maker in the financial instruments discussed, or act as an advisor, manager, underwriter or lender to such issuer. In no circumstances shall BNP Paribas or its affiliates be obliged to disclose any information that it has received on a confidential basis or to disclose the existence thereof. The information presented herein does not comprise a prospectus of securities for the purposes of EU Directive 2003/71/EC (as amended from time to time). This document was produced by a BNP Paribas group company. This document is for the use of intended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without the prior written consent of BNP Paribas. By accepting this document you agree to this. United States Disclosures Important Option Disclosures: Options are complex instruments that are not suitable for every investor, may involve a high degree of risk, and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. Supporting documentation for any claims, comparisons, recommendations, statistics or other technical data will be supplied upon request. Any trade information is preliminary and not intended as an official transaction confirmation. If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your BNP Paribas sales representative or visit the OCC's website at http://www.theocc.com/about/publications/character-risks.jsp Important ETF Disclosures: For any ETFs discussed in this document, you should consider the investment objectives, risks, and charges and expenses of the investment company carefully before investing. The prospectus, and if available, the summary prospectus, contains this and other important information about the ETF. You may obtain a prospectus and, if available, a summary prospectus by calling +1 212 841-3099. The prospectus and, if available, summary prospectus should be read carefully before investing. As with any investment, ETFs have risks. These include the general risks associated with investing in the underlying assets, potential tracking error, and the possibility that particular indices may lag other market segments or active managers. In addition, ETFs investing in international markets may include currency and geopolitical risks, while fixed income ETF risks also include credit and interest rate risk. BNP Paribas and its affiliates may hold a position or act as a market maker in the financial instruments discussed, or act as an advisor, manager, underwriter, or lender to such issuer. As a result, BNP Paribas may have potential conflicts of interest relating to the ETFs that are discussed in this material. In particular, BNP Paribas may act as an Authorized Participant in the purchase or sale of shares from an ETF and participate in the creation and redemption of the securities covered in this material. In connection with these activities, BNP Paribas may receive a fee, may be deemed to be an underwriter of the ETF shares, and may receive information about pending creations or redemptions of large blocks of ETF shares. Under no circumstances shall BNP Paribas or its affiliates be obliged to disclose any information that it has
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Legal notice received on a confidential basis or to disclose the existence of such information. BNP Paribas also may act as a market maker or block positioner in the ETF shares discussed in this material, or financial instruments that are held by the ETF and/or are part of the index whose performance the ETF seeks to track. As a result, BNP Paribas may be buying or selling ETF shares (or the instruments underlying the ETF shares) for other customers or for its own account while you are selling or buying ETF shares. BNP Paribas may have multiple advisory, transactional, financial and other interests in the companies whose securities or other instruments may be purchased or sold by an ETF discussed in this material. BNP Paribas may from time to time engage in business with these companies, including extending loans to, making equity investments in or providing advisory services to the companies, including merger and acquisition advisory services. In the course of those activities, certain BNP Paribas personnel may acquire nonpublic information about the companies. Such information could potentially affect the prices at which the ETF shares trade. BNP Paribas will maintain the confidentiality of such information and not disclose it to the ETF, ETF holders, or other unauthorized personnel. Important Disclosures for Convertibles Securities or other Securities not registered under US Securities Laws: Certain securities discussed herein may not be registered under the Securities Act of 1933 and therefore are considered “restricted securities” pursuant to Rule 144(a)(3). Only Qualified Institutional Buyers (“QIB”) as defined under rule 144A Only Qualified Institutional Buyers (“QIB”) as defined under rule 144A or non-US persons (as defined in Regulation S under the Securities Act) may be eligible to purchase such instruments.
UK: In the UK, this document is being communicated by BNP Paribas London Branch. 10 Harewood Avenue, London NW1 6AA; tel: +44 20 7595 2000; fax: +44 20 7595 2555- www.bnpparibas.com. Incorporated in France with Limited Liability. Registered Office: 16 boulevard des Italiens, 75009 Paris, France. 662 042 449 RCS Paris. BNP Paribas London Branch is lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNP Paribas London Branch is authorised by the ECB, the ACPR and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. BNP Paribas London Branch is registered in England and Wales under no. FC13447. France: This report is produced and/or is distributed in France by BNP Paribas SA and/or BNP Paribas Arbitrage. BNP Paribas SA is incorporated in France with Limited Liability (Registered Office: 16 boulevard des Italiens, 75009 Paris, France, 662 042 449 RCS Paris, www.bnpparibas.com) is authorized and supervised by European Central Bank (ECB) and by Autorité de Contrôle Prudentiel et de Résolution (ACPR) in respect of supervisions for which the competence remains at national level, in terms of Council Regulation n° 1024/2013 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions. BNP Paribas Arbitrage is an unlimited liability company, whose registered office is 160/162 boulevard Mac Donald 75019 Paris, registered with the Paris Trade and Companies Registry under number 394 895 833. It is authorised and supervised by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers in France. Germany: This report is being distributed in Germany by BNP Paribas S.A. Niederlassung Deutschland, a branch of BNP Paribas S.A. whose head office is in Paris, France. 662 042 449 RCS Paris, www.bnpparibas.com). BNP Paribas Niederlassung Deutschland is authorized and lead supervised by the European Central Bank (ECB) and by Autorité de Contrôle Prudentiel et de Résolution (ACPR) and is subject to limited supervision and regulation by Bundesanstalt für
Finanzdienstleistungsaufsicht (BaFin) in respect of supervisions for which the competence remains at national level, in terms of Council Regulation n° 2013/1024 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions as well as Council Directive n° 2013/36/EU of 26 June, 2013 and Section 53b German Banking Act (Kreditwesengesetz - KWG) providing for the principles of shared supervision between the national competent authorities in case of branches and applicable national rules and regulations. BNP Paribas Niederlassung Deutschland is registered with locations at Europa Allee 12, 60327 Frankfurt (commercial register HRB Frankfurt am Main 40950) and Bahnhofstrasse 55, 90429 Nuremberg (commercial register Nuremberg HRB Nürnberg 31129). Belgium: BNP Paribas Fortis SA/NV is authorized and supervised by European Central Bank (ECB) and by the National Bank of Belgium, boulevard de Berlaimont 14, 1000 Brussels, and is also under the supervision on investor and consumer protection of the Financial Services and Markets Authority (FSMA), rue du congrès 12-14, 1000 Brussels and is authorized as insurance agent under FSMA number 25789 A Ireland: This report is being distributed in Ireland by BNP Paribas S.A., Dublin Branch. BNP Paribas is incorporated in France as a Société Anonyme and regulated in France by the European Central Bank and by the Autorité de Contrôle Prudentiel et de Résolution. Italy: This report is being distributed by BNP Paribas Italian Branch (Succursale Italia) which is authorised and lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution and regulated by the Autorité des Marchés Financiers, and this authorisation has been notified to the Bank of Italy. BNP Paribas Succursale Italia is the Italian branch of a company incorporated under the laws of France having its registered office at 16, Boulevard des Italiens, 75009, Paris, whose offices are located in Piazza Lina Bo Bardi 3, Milan, tax code and registration number at the Companies Registry of Milan No. 04449690157, is enrolled in the register of the banks held by Bank of Italy under No. 5482, duly authorised to provide in Italy banking and investment services according the principle of the mutual recognition. The branch is subject to limited regulation by the Bank of Italy and the CONSOB respectively. Netherlands: This report is being distributed in the Netherlands by BNP Paribas Fortis SA/NV, Netherlands Branch, a branch of BNP Paribas SA/NV whose head office is in Brussels, Belgium. BNP Paribas Fortis SA/NV, Netherlands Branch, Herengracht 595, 1017 CE Amsterdam, is authorised and supervised by the European Central Bank (ECB) and the National Bank of Belgium and is also supervised by the Belgian Financial Services and Markets Authority (FSMA) and it is subject to limited regulation by the Netherlands Authority for the Financial Markets (AFM) and the Dutch Central Bank (De Nederlandsche Bank). Portugal: BNP Paribas – Sucursal em Portugal Avenida 5 de Outubro, 206, 1050-065 Lisboa, Portugal. www.bnpparibas.com. Incorporated in France with Limited Liability. Registered Office: 16 boulevard des Italiens, 75009 Paris, France. 662 042 449 RCS Paris. BNP Paribas – Sucursal em Portugal is lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNP Paribas - Sucursal em Portugal is authorized by the ECB, the ACPR and Resolution and it is authorized and subject to limited regulation by Banco de Portugal and Comissão do Mercado de Valores Mobiliários. BNP Paribas - Sucursal em Portugal is registered in C.R.C. of Lisbon under no. NIPC 980000416. VAT Number PT 980 000 416.”
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Legal notice Spain: This report is being distributed in Spain by BNP Paribas S.A., S.E., a branch of BNP Paribas S.A. whose head office is in Paris, France (Registered Office: 16 boulevard des Italiens, 75009 Paris, France). BNP Paribas S.A., S.E., C/Ribera de Loira 28, Madrid 28042 is authorised and supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and subject to limited regulation by the Bank of Spain. Switzerland: This report is intended solely for customers who are “Qualified Investors” as defined in article 10 paragraphs 3 and 4 of the Federal Act on Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Federal Ordinance on Collective Investment Schemes of 22 November 2006 (CISO). “Qualified Investors” includes, among others, regulated financial intermediaries such as banks, securities traders, fund management companies and asset managers of collective investment schemes, regulated insurance institutions as well as pension funds and companies with professional treasury operations. This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to Qualified Investors. For specification purposes, a “Swiss Corporate Customer” is a Client which is a corporate entity, incorporated and existing under the laws of Switzerland and which qualifies as “Qualified Investor” as defined above." BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss Financial Market Supervisory Authority FINMA. BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No. CHE-102.922.193. BNP Paribas (Suisse) SA is incorporated in Switzerland with limited liability. Registered Office: 2, place de Hollande, 1204 Geneva, Switzerland. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence.
United States: This report may be distributed (i) by BNP Paribas Securities Corp. to U.S. persons who qualify as an institutional investor under FINRA Rule 2210(a) (4), or (ii) by a subsidiary or affiliate of BNP Paribas that is not registered as a US broker-dealer only to U.S. persons who are considered “major U.S. institutional investors” (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended). U.S. persons who wish to effect transactions in securities discussed herein must contact a BNP Paribas Securities Corp. representative unless otherwise authorized by law to contact a non-US affiliate of BNP Paribas. BNP Paribas Securities Corp. is a broker dealer registered with the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) and member of FINRA, SIPC, NFA, NYSE and other principal exchanges. THIS DOCUMENT IS FOR THE GENERAL INFORMATION OF BNP PARIBAS’S CLIENTS AND IS A GENERAL SOLICITATION OF DERIVATIVES BUSINESS FOR THE PURPOSES OF, AND TO THE EXTENT IT IS SUBJECT TO, §§ 1.71 AND 23.605 OF THE U.S. COMMODITY EXCHANGE ACT.
Brazil: This report was prepared by Banco BNP Paribas Brasil S.A. or by its subsidiaries, affiliates and controlled companies, together referred to as "BNP Paribas", for information purposes only and do not represent an offer or request for investment or divestment of assets. Banco BNP Paribas Brasil S.A. is a financial institution duly incorporated in Brazil and duly authorized by the Central Bank of Brazil and by the Brazilian Securities Commission to manage investment funds. Notwithstanding the caution to obtain and manage the information herein presented, BNP Paribas shall not be responsible for the accidental publication of incorrect information, nor for investment decisions taken based on the information contained herein, which can be modified without prior notice. Banco BNP Paribas Brasil S.A. shall not be responsible to update or revise any information contained herein. Banco BNP Paribas Brasil S.A. shall not be responsible for any loss caused by the use of any information contained herein. Turkey: This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER A.S., Teb Kampus D Blok Saray Mah. Kucuksu Cad. Sokullu Sok., No:7 34768 Umraniye, Istanbul, Turkey, Trade register number: 358354, www.tebyatirim.com.tr). Notice Published in accordance with ‘‘Communiqué Regarding the Principles on Investment Consultancy Activities and the Investment Consultancy Institutions’’ Series: V, No: 55 issued by the Capital Markets Board. The investment related information, commentary and recommendations contained herein do not constitute investment consultancy services. Investment consultancy services are provided in accordance with investment consultancy agreements executed between investors and brokerage companies or portfolio management companies or non-deposit accepting banks. The commentary and recommendations contained herein are based on the personal views of the persons who have made such commentary and recommendations. These views may not conform to your financial standing or to your risk and return preferences. Therefore, investment decisions based solely on the information provided herein may fail to produce results in accordance with your expectations. Israel: BNP Paribas does not hold a licence under the Investment Advice and Marketing Law of Israel, to offer investment advice of any type, including, but not limited to, investment advice relating to any financial products. Bahrain: This document is being distributed in Bahrain by BNP Paribas Wholesale Bank Bahrain, a branch of BNP Paribas S.A. whose head office is in Paris, France (Registered Office: 16 boulevard des Italiens, 75009 Paris, France). BNP Paribas Wholesale Bank Bahrain is licensed and regulated as a Registered Institution by the Central Bank of Bahrain – CBB. This document does not, nor is it intended to, constitute an offer to issue, sell or acquire, or solicit an offer to sell or acquire any securities or to enter into any transaction. South Africa: BNP Paribas Securities South Africa (Pty) Ltd (Registration number 1996/009716/07) is a licensed member of the Johannesburg Stock Exchange and an authorised Financial Services Provider (FSP 29451) in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Any view or opinion expressed in this report does not constitute advice and the recipient should obtain their own advice prior to making any decision or taking any action whatsoever based hereon. China: This document is being distributed in the People’s Republic of China (“PRC”), excluding the Hong Kong or Macau Special Administrative Regions or Taiwan) by BNP Paribas (China) Limited (“BNPP China”), a subsidiary of BNP Paribas. BNPP China is a commercial bank licensed by the China Banking Regulatory Commission to carry on banking business in the PRC.
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Legal notice India: In India, this document is being distributed by BNP Paribas Securities India Pvt. Ltd. ("BNPPSIPL"), having its registered office at 5th floor, BNP Paribas House, 1 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 (Tel. no. +91 22 3370 4000 / 6196 4000 / Fax no. +91 22 3370 4363). BNPPSIPL is registered with the Securities and Exchange Board of India (“SEBI”) as a stockbroker in the Equities and the Futures & Options segments of National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. (SEBI Regn. Nos.: INB/INF231474835, INB/INF011474831; CIN: U74920MH2008FTC182807; Website: www.bnpparibas.co.in). Indonesia: This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by licensed employee(s) to its clients. PT BNP Paribas Securities Indonesia, having its registered office at Menara BCA, 35th Floor, Grand Indonesia, Jl. M.H.Thamrin No.1, Jakarta, 10310, Indonesia, is a fully subsidiaries company of BNP Paribas SA and is licensed under Capital Market Law No. 8 of 1995 and the holder of broker-dealer and underwriter licenses issued by the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK). PT BNP Paribas Securities Indonesia is also a member of Indonesia Stock Exchange. Neither this research publication nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations. This research publication is not an offer of securities in Indonesia. Some of the securities referred to in this research publication have not been registered with the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstance which constitute an offer within the meaning of Indonesian capital market laws and regulations. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association, the Financial Futures Association of Japan and the Type II Financial Instruments Firms Association. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Malaysia: This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd. The views and opinions in this research report are our own as of the date hereof and are subject to change. BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd. This publication is being provided to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd. Philippines: This report is being distributed in the Philippines by BNP Paribas Manila Branch, an Offshore Banking Unit (OBU) of BNP Paribas whose head office is in Paris, France. BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No. 1034 (PD 1034),
and regulated by the Bangko Sentral ng Pilipinas. This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034, and is qualified in its entirety to the products and services allowed under PD 1034. Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch is registered as a Licensed Bank under the Banking Ordinance and regulated by the Hong Kong Monetary Authority. BNP Paribas Hong Kong Branch is also a Registered Institution regulated by the Securities and Futures Commission for the conduct of Regulated Activity Types 1, 4 and 6 under the Securities and Futures Ordinance. Singapore: BNP Paribas Singapore Branch is regulated in Singapore by the Monetary Authority of Singapore under the Banking Act, the Securities and Futures Act and the Financial Advisers Act. This report may not be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, Chapter 289 of Singapore ("SFA"), (ii) to an accredited investor or other relevant person, or any person under Section 275(1A) of the SFA, pursuant to and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA. South Korea: Branch: BNP Paribas Seoul Branch is regulated by the Financial Services Commission and Financial Supervisory Service for the conduct of its financial investment business in the Republic of Korea. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. Securities: BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. Taiwan: BNP Paribas Taipei Branch is registered as a licensed bank under the Banking Act and regulated by the Financial Supervisory Commission, R.O.C. This report is directed only at Taiwanese counterparties who are licensed or who have the capacities to purchase or transact in such products. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in Taiwan. Thailand: Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (“BNPP”) and Finansia Syrus Securities Public Company Limited (“FSS”). FSS International Investment Advisory Securities Co Ltd (“FSSIA”) prepares and distributes research under the brand name “BNP PARIBAS/FSS”. BNPP is not an affiliate of FSSIA or FSS. FSS also publishes a different research product under the brand name “FINANSIA SYRUS,” which is prepared by research analysts who are not part of FSSIA and who may cover the same securities, issuers, or industries that are the subject of this report. The ratings, recommendations, and views expressed in this report may differ from the ratings, recommendations, and views expressed by other research analysts or research teams employed by FSS. This report is being distributed outside Thailand by members of BNP Paribas. Australia: This material, and any information in related marketing presentations (the Material), is being distributed in Australia by BNP Paribas ABN 23 000 000 117, a branch of BNP Paribas 662 042
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Legal notice 449 R.C.S., a licensed bank whose head office is in Paris, France. BNP Paribas is licensed in Australia as a Foreign Approved Deposit-taking Institution by the Australian Prudential Regulation Authority (APRA) and delivers financial services to Wholesale clients under its Australian Financial Services Licence (AFSL) No. 238043 which is regulated by the Australian Securities & Investments Commission (ASIC).The Material is directed to Wholesale clients only and is not intended for Retail clients (as both terms are defined by the Corporations Act 2001, sections 761G and 761GA). The Material is subject to change without notice and BNP Paribas is under no obligation to update the information or correct any inaccuracy that may appear at a later date. Some or all of the information contained in this document may already have been published on https://globalmarkets.bnpparibas.com © BNP Paribas (2017). All rights reserved. IMPORTANT DISCLOSURES by producers and disseminators of investment recommendations for the purposes of the Market Abuse Regulation: Although the disclosures provided herein have been prepared on the basis of information we believe to be accurate, we do not guarantee the accuracy, completeness or reasonableness of any such disclosures. The disclosures provided herein have been prepared in good faith and are based on internal calculations, which may include, without limitation, rounding and approximations. BNP Paribas and/or its affiliates may be a market maker or liquidity provider in financial instruments of the issuer mentioned in the recommendation.
BNP Paribas and/or its affiliates may provide such services as described in Sections A and B of Annex I of MiFID II (Directive 2014/65/EU), to the Issuer to which this investment recommendation relates. However, BNP Paribas is unable to disclose specific relationships/agreements due to client confidentiality obligations. Section A and B services include A. Investment services and activities: (1) Reception and transmission of orders in relation to one or more financial instruments; (2) Execution of orders on behalf of clients; (3) Dealing on own account; (4) Portfolio management; (5) Investment advice; (6) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis; (7) Placing of financial instruments without a firm commitment basis; (8) Operation of an MTF; and (9) Operation of an OTF. B. Ancillary services: (1) Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management and excluding maintaining securities accounts at the top tier level; (2) Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction; (3) Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings; (4) Foreign exchange services where these are connected to the provision of investment services; (5) Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments; (6) Services related to underwriting; and (7) Investment services and activities as well as ancillary services of the type included under Section A or B of Annex 1 related to the underlying of the derivatives included under points (5), (6), (7) and (10) of Section C (detailing the MiFID II Financial Instruments) where these are connected to the provision of investment or ancillary services.
BNP Paribas and/or its affiliates do not, as a matter of policy, permit pre-arrangements with issuers to produce recommendations. BNP Paribas and/or its affiliates as a matter of policy do not permit issuers to review or see unpublished recommendations. BNP Paribas and/or its affiliates acknowledge the importance of conflicts of interest prevention and have established robust policies and procedures and maintain effective organisational structure to prevent and avoid conflicts of interest that could impair the objectivity of this recommendation including, but not limited to, information barriers, personal account dealing restrictions and management of inside information. BNP Paribas and/or its affiliates understand the importance of protecting confidential information and maintain a “need to know” approach when dealing with any confidential information. Information barriers are a key arrangement we have in place in this regard. Such arrangements, along with embedded policies and procedures, provide that information held in the course of carrying on one part of its business to be withheld from and not to be used in the course of carrying on another part of its business. It is a way of managing conflicts of interest whereby the business of the bank is separated by physical and non-physical information barriers. The Control Room manages this information flow between different areas of the bank where confidential information including inside information and proprietary information is safeguarded. There is also a conflict clearance process before getting involved in a deal or transaction. In addition, there is a mitigation measure to manage conflicts of interest for each transaction with controls put in place to restrict the information flow, involvement of personnel and handling of client relations between each transaction in such a way that the different interests are appropriately protected. Gifts and Entertainment policy is to monitor physical gifts, benefits and invitation to events that is in line with the firm policy and Anti-Bribery regulations. BNP Paribas maintains several policies with respect to conflicts of interest including our Personal Account Dealing and Outside Business Interests policies which sit alongside our general Conflicts of Interest Policy, along with several policies that the firm has in place to prevent and avoid conflicts of interest. The remuneration of the individual producer of the investment recommendation may be linked to trading or any other fees in relation to their global business line received by BNP Paribas and/or affiliates. IMPORTANT DISCLOSURES by disseminators of investment recommendations for the purposes of the Market Abuse Regulation: The BNP Paribas disseminator of the investment recommendation is identified above including information regarding the relevant competent authorities which regulate the disseminator. The name of the individual producer within BNP Paribas or an affiliate and the legal entity the individual producer is associated with are identified above in this document. The date and time of the first dissemination of this investment recommendation by BNP Paribas or an affiliate is addressed above. Where this investment recommendation is communicated by Bloomberg chat or by email by an individual within BNP Paribas or an affiliate, the date and time of the dissemination by the relevant individual is contained in the communication by that individual disseminator.
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Legal notice The disseminator and producer of the investment recommendations are part of the same group, i.e. the BNP Paribas group. The relevant Market Abuse Regulation disclosures required to be made by producers and disseminators of investment recommendations are provided by the producer for and on behalf of the BNP Paribas Group legal entities disseminating those recommendations and the same disclosures also apply to the disseminator. If an investment recommendation is disseminated by an individual within BNP Paribas or an affiliate via Bloomberg chat or email, the disseminator’s job title is available in their Bloomberg profile or bio. If an investment recommendation is disseminated by an individual within BNP Paribas or an affiliate via email, the individual disseminator’s job title is available in their email signature. For further details on the basis of recommendation specific disclosures available at this link (e.g. valuations or methodologies, and the underlying assumptions, used to evaluate financial instruments or issuers, interests or conflicts that could impair objectivity recommendations or to 12 month history of recommendations history) are available at https://globalmarkets.bnpparibas.com/gmportal/private/globalTradeIdea. If you are unable to access the website please contact your BNP Paribas representative for a copy of this document.
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