GLOBAL INVESTMENT STRATEGY, EXECUTION AND RISK MANAGEMENT FOR INSTITUTIONAL INVESTORS

 

 

France Trade Idea – Wednesday, February 28^th 2018

 

 

 

High Coupon Structure –

Sell Frtr 3.5% Apr 26 to buy High Coupon Frtr 6% Oct 25 and OAT contracts

 

Mechanics

• Sell Frtr 3.5% 4/26
• Buy Frtr 6% 10/25 & OAT contracts (CTD Frtr 2.75% 10/27)

 

• Weighting: +1.5/-2/+0.5
• Cix:        200 * (YIELD[FRTR 3.5 4/26 Corp] - 0.75 * YIELD[FRTR 6 10/25 Corp] - 0.25 * YIELD[FRTR 2.75 10/27 Corp])

 

Trade levels

• Pay the Spread @ -3bp (50% size)
• Add @ -4.5bp
• Stop @ -7bp
• Final Target @ +4bp (approx. 8bp profit)

 

History

• Bloomberg Graph

 

• Relative Value vs Smoothed Frtr Zero Curve

Nota Bene:

Under this analysis, we correctly see that the high coupons that appear rich in yield space, now appear cheap in discounted cashflow space, due to the steep curve. Implying this methodology is a valid way of explaining much of the confusing rich/cheap analysis when applied simply to yields rather than cashflows

 

Rationale

• The high coupon Frtr 3.25 % 4/26 have traded rich since their period as CTD to the OAT contract up until September 2017 (OATU7 – Eurex ), they actually sit on the high coupon curve (avg. coupon for the curve 2.5%)
• The bond then richened after falling out as CTD, it would appear that possibly were considerable macro shorts that failed to roll and the bond surfed into the richer, index matching 7yr segment
• Other high coupons have since cheapened on the yield curve (see graph on yield vs Average over last 6 months) possibly as a change in the dynamic of PSPP this year. Frtr apr 26s as a relatively high coupon bond are now exposed as rich on true anomaly value
• The Tresor are tapping similar maturity Frtr 0.5% 5/26 tomorrow, Thursday Mar 1^st. In pursuit of an orderly market there is a chance of a tap of the Frtr 3.5% 4/26 going forward

 

Yields vs Average yield over last 6 months

• Below is the current yield on each bond, minus the average yield for the last 6 months (expressed in bp’s). It shows how the higher coupon issues, such as Frtr 6% Oct 25  & Frtr 5.5% Apr 29 have underperformed and we could possibly expect the same now for Frtr 4/26

 

 

Carry & Roll

• Carry -0.1bp /3mo (repo spread of 10bp on front leg & implied of -0.75% Jun contract)
• Roll 0.0bp /3mo
• Sum: C&R -0.1bp /3mo

 

Rich/Cheap – Bloomberg GOVY Cubic Spline Model, 3mo. History

• Frtr 3.25% 4/26, z-score -2.8
• Frtr 6% 10/25, z-score +2.0
• Frtr 2.75% 10/25, z-score -1.6

 

Risks

• The Frtr 3.25% 4/26 continue to trade rich as close the index modified duration
• The Frtr 4/26 get much richer on repo that mitigates their richness
• The Frtr 10/27 and 10/25 stay cheap on the curve, relatively

 

 

 

 

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

Italy Trade Idea – Wednesday, February 28^th 2018

 

 

Buy Italy 20y vs selling old 20y and old 30y, curve weighted

 

Mechanics

• Buy Btps 2.95% 9/38
• Sell Btps 2.25% 9/36 & Btps 2.7 3/47

 

• Weighting: -1.34/+2/-0.66
• Cix:       

200 * (YIELD[BTPS 2.95 9/38 Corp] - 0.67 * YIELD[BTPS 2.25 9/36 Corp] - 0.33 * YIELD[BTPS 2.7 3/47 Corp])

 

Trade levels

• First Entry @+9.5bp (1/2 size)
• Second Entry @ +10.5bp (1/2 size)
• Target @+4bp
• Stop @+13bp

 

History

• Bloomberg graph – history limited to issue date of 9/38s on 9^th January 2018

 

• Relative Value vs Smoothed Btp Zero Curve

Italian anomaly value using smooth zero curve – Green – Low coupons, Blue High Coupons.

Note that under this analysis we correctly see that the high coupons that appear rich in yield space now appear cheap in discounted cashflow space, due to the steep curve. Very rarely do we see a low coupon genuinely cheap to high coupons under this metric. That would imply the default option as approx zero cost relative to High coupons

 

Rationale

• The New btps 38s have struggled to place well in the curve as a new issue. They haven’t flattened vs Btps 36s (see spread graph), which trade richer, despite a generic flattening of 10s30s in European curve
• To capture value in low coupons, we have to constrain ourselves to low coupon issues, if we are at all concerned about a spread widening after the Italian elections (Sunday 4^th March)
• The relative RV suggests that the pricing of the 38s is now at a point to be not too distant from the High coupon Btps  4% 2/37 – a loose boundary condition
• Now that we’ve had a couple of month’s pricing and with month end flows we could see cash being placed in the new Btps 38s
• Btps 47s were traditionally cheap (given their low coupon) but have now richened pulling away from the High coupon curve and provide an anchor (33% weighting) to give the trade curve balance
• The trade is weighting according to the shape of the fitted curve – such that, curvature is hedged and expected to increase in steeper curves and vice versa in a flatter one environment

 

Bloomberg Spread History

 

Carry & Roll

• Carry +0.4bp /3mo (repo spread of 10bp)
• Roll 0.0bp /3mo
• Sum: C&R +0.4bp /3mo

 

Risks

• The Btps 38s continues to trade cheaply as an ongoing tap issue
• The Sep36 and Mar47 – continue to richen as older issues with lower float

 

 

 

 

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

Some thoughts on the Spanish 48 syndication

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

Italy Sell Old 10y into High coupon 9y, narrowing credit spread and supply trade   Mechanics +€50k Btps 7.25% Nov26, +50MM -€50k Btps 2.05% Aug27, -58MM   @-19.2bp Entry @ -18bp   Target -24bp, based on the narrowing credit spread we see the Nov26 as having underperformed beyond the average yield spread Stop @-15 Bloomgberg Yield History     Bloomberg Value vs Par curve (GOVY)     Rationale Trade has ‘hidden value’ due to low modified duration of the Btps 11/26 in positively sloped curve Trade is on historical extremes vs model: Nov26 +1/02 Std Dev cheap, Aug27 -1.76 Std Dev rich to 3m spline model Supply in the New Btps Feb 28 at end of month, which look cheap to Aug27s (+10.3bp), could cause Aug27 to cheapen As the credit (It/Ge) has narrowed significantly in the last two months, the high coupons should outperform, reflecting a lower probability of Default already implicit in spread to Germany   Roll & Carry (per 3mo) Carry +0.7bp (-15bp repo spread) Roll: +1.2bp   Risks A significant widening in It/Ge causes the high coupon to underperform Structural cheapness of Italian 10yrs attracts buyers of on the run issuers

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">Ital

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

 

Looking for the last vestiges of Credit flattening in France vs Swaps   Mechanics Sell 19MM Frtr May45 vs Buy 16.2MM Frtr May66 (€50k/01) vs MMS   Target entry @ +29.5bp Add @ +31.5bp Trade Target +26.5bp Stop @ +34bp   Spread of Spreads  - (BBG)     Changes in Swap Spreads in France vs 6m average       Rationale Recent 66s issuance has left an overhang on the market – leaving us with an opportunity As long end (30y) has outperformed both shorter tenors and other core issuers the 66s haven’t fully reflected the move France as a super-performing credit and has had a generic flattening, across most of the curve vs swaps The 2045 vs 2066 relatively has been left behind by the rising tide of spread flattening The 2045 have had an empathetic bid from the outperformance of the benchmark 30y In aggressing this spread of spreads we are trying to grab the last vestiges of the spread flattening. In the longs it has failed to keep up with the generic move – the Ultra long France 66s have strong convexity characteristics   50y supply Tap Dates of 66s 3 Bln, Apr 2016 1.4 Bln, Sep 2016 1.4 Bln, Dec 2016 1 Bln, Feb 2017 2.3 Bln, Jan 2018 so we have seen a recent large tap and expect no further issuance in the near future     Risks We see a significant widening in generic and/or French specific credit conditions The ultra-long sector of France continues to underperform from issuance or further selling – see issuance schedule above

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

 

Tuesday 30^th Jan 2018

 

Spanish Supply – Thursday 1^st Feb – Spgb 2.15% Oct 25

 

 

 

Spain  – Steepener Oct/25 vs Oct/27 vs France   Trade Mechanics Structure 1 Sell €100k Spgb 1.45% 10/27 & Buy €100k Spgb 2.15% 10/25 vs MMS @ -14bp     Or Structure 2 Buy €100k Spgb 1.45% 10/27 & Sell €100k Spgb 2.15% 10/25 vs Frtr Flattener €100k Frtr 5/25 vs Oat contracts currently @ +1.3bp 100 * ((YIELD[SPGB 1.45 10/27 Corp] - YIELD[SPGB 2.15 10/25 Corp]) - (YIELD[FRTR 2.75 10/27 Corp] - YIELD[FRTR 0.5 5/25 Corp]))     Trade RV – using French Curve as Base Line we plot other European curves to look for anomalies   Rationale Spanish Bonds tightened to semi-core markets The Boundary condition for the Spanish Curve should be that it should not be flatter then stronger credits such as France or Swaps Forthcoming supply on Thursday means the Spgb 2.15% Oct/25 has cheapened The Spgb Oct rolls into the expensive Apr 25. For example Oct 24 into Apr 25 is +3.4 in z-spread, whereas Apr 25 into Oct 25 is +10.2bp in z-spread   Low Friction Structure vs Swap Alternatively the trade can be expressed against same maturity swaps – approx -14bp   Trade Details vs Swap Currently @ -14bp Target @  -17.5bp Add @ -12bp Stop @ -8bp   Carry & Roll Bond Carry and Roll (20bp repo spread) +0.4bp/3mo Swap Roll -0.6bp/3mo   Risks Oct 25 / Oct 27 in Spain continues to flatten The Swap or French Hedge prove unreliable hedge mechanisms The Funding Spread on the Spgb Oct 25 vs Spgb Oct 27 obviates the benefit of the trade

 

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

 

UK:         60 Cannon Street, London, EC4N 6NP

US:          245 Park Ave, 39^th Floor, NY, NY, 10167

Office:   +44 (0) 207 - 002 - 1336

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

 

Trade Opportunity – Monday, 29th July 2018

 

 

France – Frtr Tactical Auction Trade Long 18y Short 10y and Short 30y wings   Trade Mechanics Buy €100k Frtr 1.25% 5/36 vs Sell €67k Frtr 2% 5/48 & Sell €33k Frtr 2.75% 10/27 (or OAT contracts)   Weighting 0.66/2/1.34 Weighted as per fitted yield curve shape   @ -4.7bp (current level)   Trade History – BBG 200 * (YIELD[FRTR 1.25 36 Corp] - 0.33 * YIELD[FRTR 2.75 10/27 Corp] - 0.67 * YIELD[FRTR 2 5/48 Corp])     Trade RV – Frtr Relative Swap Spreads (Base Line is Germany)     Rationale The French 20y has failed to keep up with recent flattening in line with the fitted curve A new French 15y on Thursday (Frtr 1.25% 34)  means that dealers have marked down the old 20y – Frtr 2036s The curve weighting employed uses a technique based on hedging the shape of the curve – curve pairs with closer yields move more in tandem than steep pairs On z-spread, the trade reflects a discount beyond the swap curve moves of late This trade is tactical around the discount present due to recent supply – time frame 2 months   Vs Swaps – is there edge? Trade is approx -20bp vs relative to the Euro Swap Curves See recent history 2 * (SP210[FRTR 1.25 36 Corp] - 0.33 * SP210[FRTR 2.75 10/27 Corp] - 0.67 * SP210[FRTR 2 5/48 Corp]) SP210 is BBG code for swap spread       Curve Dynamic Changes in French Asset Swap levels vs the average of the last 100 trading days       Trade Details – receiving the spread Currently @ -4.0bp 50% scaled Target @  -7bp Add @ -2.5bp Stop @ +1bp   Carry & Roll Carry -0.35bp/3mo (using 15bp repo spread) Roll +0.1bp /3mo   Risks Frtr 5/36 continue to cheapen on the curve  - note entry level for trade is back from current mid and scaled The Wings bonds richen in the context of the curve

 

 

 

James Rice

 

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UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

 

 

Trade Example – Thursday, 25th July 2018

 

Any comments please?

 

 

France – 3y vs 9y steepener vs Germany   Trade Mechanics Buy €100k Frtr 0 5/21 vs Sell €100k Frtr 0.25% 11/26 Vs €80k  -DUA / +RXA   @ 0bp (using 2nd CTD, for history) See Trade Details below for execution levels using schzte CTD Trade History – BBG ( using 2nd CTD for longer history on the DUA CTD) ((YIELD[FRTR 0.25 11/26 Corp] - YIELD[FRTR 0 5/21 Corp]) - 0.8 * (YIELD[DBR 0.25 2/27 Corp] - YIELD[DBR 3.25 1/20 Corp]))     Trade RV – using smoothed French Anomalies vs Smooth Strip Curve Here we take all cashflows and discount them using a smoothed German Discount Function     Rationale The strength of French Bonds and the narrowing of country spreads has reduced French Term premia to almost nothing in places The French aggregate bond index has a maturity of 7-8 years – a desire to get neutral to index, causes buying particularly in the 2026 maturities Current spreads to Germany of the May 21 to Nov 26 imply almost no increased return to extend – curve is flat to Germany – a loose boundary condition The two bonds chosen reflect an exaggerated move  - see curve dynamic Next supply in France is in longer maturities – February 1st, with potential to tap specific issues   Vs Swaps Trade is approx -8bp vs Swaps       Curve Dynamic Changes in French Asset Swap levels vs the average of the last 100 trading days     Trade Using the CTD of the Schatze (correct short end hedge bond but with limited history) Cix: 100 * ((YIELD[FRTR 0.25 11/26 Corp] - YIELD[FRTR 0 5/21 Corp]) - 0.8 * (YIELD[DBR 0.25 2/27 Corp] - YIELD[BKO 12/19 Corp]))   Trade Details – paying the spread Currently @ +1.8bp Target @  +5bp Add @ +0bp Stop @ -2bp   Carry & Roll Total C&R +0.7bp /3mo French Side Carry -1.3bp/3mo (using 15bp repo spread) Roll +0.8bp German Side (at 80% hedge ratio) Carry 1.3bp/3mo (using CTD implieds) Roll -0.1bp     Risks Frtr 11/26 continue to flatten vs Frtr 5/21 Dua vs Rxa – proves anomalous as a hedge mechanism

 

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

 

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796