The Bank of Mexico will meet on 29 September, and a 50bp rate hike is already priced in
Epstein Suite indexes the text; the original document lives at its official source. We don't host the original file — view it on the official release to read it in full.
View the original on the official releaseDocument text
Text is machine OCR and may contain errors. Confirm against the original source above.
The Bank of Mexico will meet on 29 September, and a 50bp rate hike is already priced in
(Chart 4). A stronger hike, perhaps of 75bp, or a 50bp rate hike accompanied by a
hawkish statement could lead to MXN strengthening in the very short run.
Chart 3: Net speculative USD/MXN position in CFTC Chart 4: Bank of Mexico expected to hike
8 20 300
6 "8 250
4 18
> 17 200
0 16 150
2 8 100 2
4 14
8 12 0 kt oe 0
2013 2014 2015 2016 2012 2013 2014 2015 2016
mms Net Dollar position ———=MXN mmm spread —=—‘1y TIIE -—=—=ONR
Source: BofA Merrill Lynch Global Research, Bloomberg Source: BofA Merrill Lynch Global Research, Bloomberg
Notable Rates and FX Research
* Global Rates & Currencies 2016 Year Ahead, 23 November 2015
* USD/MXN builds momentum, FX Quant Trader, 19 Sep 2016
* Central banks still the only game in town, Global Rates and FX Weekly, 15 Sep 2016
* Land of the rising bond yield, US Rates Weekly, 16 Sep 2016
* Policy uncertainty, Liquid Cross Border Flows, 19 Sep 2016
Key trade ideas
Top Rates and FX trades for 2016
For rationale and details, refer to Global Rates & Currencies 2016 Year Ahead: The
“Great Divorce”, 23 November, 2015
Rates:
Buy US 30y TIPS, entry: 1.2%, target: 70bp, stop loss: 1.55%
Closed at 101bp (3 Mar 2016): Short USD 5y5y vs EUR 5y5y, entry: 115 bp, target: 160
bp, stop-loss: 90 bp (3 Sep 2015)
Long $100mn 6m5y ATMF UK vs $100.75mn US rates straddles, net take-in: $126K,
target: +450K, stop: -$225K
Sell 3y Fannie Mae debt vs Treasuries, entry: 6bp, stop: 2bp, target: 20bp
Closed at 11bp - Long 12m Treasury bills vs OIS, entry: 1bp, target: -10bp, stop: 7bp
FX:
Closed at 6.5630 (26 May 2016): Buy USD/CNH 6m forward outright, entry: 6.5260,
stop: 6.40
Long a 12m USD/CNH forward outright, entry: 6.7485, target 7.00, stop: 6.67, current:
6.7420 (26 May 2016)
Closed at 0% - Buy EUR/USD 3m 1.10 call with a 16 Dec 1.1050 window KO, cost:
0.55% EUR (spot: 1.0690)
Buy ly EUR/USD<1.00, USD/JPY<120 dual digital, cost: 7.0% USD (spot: 1.0690, 122.80)
Bankof America <> ee
Merrill Lynch Liquid Insight | 22 September 2016 3
HOUSE_OVERSIGHT_010611
Have a question about what this document contains?
Ask the documents