target. It is possible that Trump’s election could weaken fiscal discipline in the Eurozone

target. It is possible that Trump’s election could weaken fiscal discipline in the Eurozone over the medium term, but we are more concerned by the non-trivial risk that the ECB may disappoint in the December meeting by either not extending quantitative easing (QE) beyond next March or announcing tapering prematurely. We like selling 30y breakeven. Our commodity team expects OPEC to agree on production cuts on November 30. This should help support oil prices and the currencies of oil producers like Russia. With the election of Trump, the probability has increased that there could be some sanction relief for Russia under the new US administration. RUB has the additional advantage of offering the highest real rates in EM right now. Given our bullish view on the USD, we would recommend selling EUR/RUB. Top 10 Rates, EM & FX trades for 2017 1. Short US 5y rates — Two and a half Fed hikes priced by the rates market for 2017-18 are not consistent with aggressive fiscal easing promised by Trump. 2. Short US 10y real rates — After the violent repricing of inflation breakevens, real rates offer better risk-reward to position for higher rates. 3. Buy USD/JPY — With the BO) pegging 10y JGB yields at zero, we expect this highly interest rate sensitive USD cross will continue to be the biggest beneficiary of the Trump win. 4. Sell a basket of Brazilian, Mexican, and Colombian long bonds — Positioning in EM fixed income market remains crowded while liquidity is poor. 5. Sell BRL/MXN - MXN is oversold but BRL will be vulnerable to the divergent paths between Brazil’s easing and the Fed’s tightening cycles. 6. Buy USD call/CNH put — President Trump will need a weak USD, but President Xi needs a weak CNY. We believe risk premium for a collision course is too low. 7. Sell EUR/GBP - Brexit and Trump could bolster the anti-globalization parties in Europe ahead of key elections next year. 8. Sell Eurozone 30y inflation breakevens — We think investors should take advantage of the recent rally to sell into the December ECB meeting, which could disappoint. 9. Sell EUR/RUB — Likely OPEC production cuts on November 30 and possible sanction relief for Russia are bullish for the RUB, in our view. 10. Buy NZD/USD put spread — Spot NZD/USD is forming a head and shoulders top pattern that suggests a decline will follow in 2017. The rationale and risks to the trades are detailed below. For a complete list of open and closed trades see the Global Liquid Markets Weekly. 6 Global Rates, FX & EM 2017 Year Ahead | 16 November 2016 Bankof America Merrill Lynch HOUSE_OVERSIGHT_014736