From: Barrett, Paul S
Sent: Thursday, March 24, 2016 7:03 PM
To: Brad Wechsler
Cc: Jeffrey Epstein (jeevacation@gmail.com); Barrett Team
Subject: BRL Trade Idea
Brad
The spread between Brazilian Government yields and Pe=robras has blown out from 100bps in June '15 to around
500bps to=ay for their USD bonds. Our view is that the government will backstop Petro=ras and will not allow it to
default on its debt (Govt net reserves = $200bIn ; Petrobras debt notional = $105B=n). We think it makes sense to play
for the spread to compress back to 300-=00bps.
We can execute this through a long PETBRA position an= buying protection on 5 yr BRL CDS to reduce risk. Details below.
1. &n=sp; Spread Trade - CDS leg reduces risk in fir=t option
Buy Petrobras bonds are y=elding —10%
Buy Brazil CDS costs 3.96=
The bet is that spreads t=ghten (see green chart below).
Source: Bloomberg 3/2=116
5yr Petrobras & 5yr Brazil CDS: </=:p>
Buy
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Buy CDS Protection
Bond:
PETBRA 5 % 01/27/21
Contract:
Brazil Syr CDS
Issuer:
PETROBRAS GLOBAL FINANCE
Underlying Issuer:
Federative Republic of Brazil
ISIN:
Maturity:
06/20/21
Ratings:
B3/B+/BB+
Coupon:
100 bps
Ranking:
Sr Unsecured
Spread:
396 bps
Price:
$83.00
Upfront Pmt (per $10mm):
- 1,329,935 USD
YTW:
2
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9.88%
Initial DV01 (per $10mm):
4,051 USD
Z-spread:
861 bps
Duration:
3.37
Source: Bloomberg 3/2=116
<=pan style="font-size:8.0pt;font-family:"Verdana","sans-ser=f";colorlISFSFSF;mso-fareast-language:EN-
US">
<=pan style="font-size:8.0pt;font-family:"Verdana","sans-ser=f";colorlt1F497D;mso-fareast-language:EN-US">Paul
Barrett I Managing Direct=r I Global Investment Opportunities Group I J.P. Morgan Securities LLC I J.P. Morgan Private
Bank I =1.P. Morgan Chase Bank N.A.
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