From: jeffrey E. <jeevacation@gmail.com>
Sent: Thursday, November 5, 2015 3:52 PM
To: Jabor Y.
Subject: Fwd: Saudi rates and CDS
S&P cut Saudi Arab=a from A+ to AA- earlier this week as they expect the fiscal deficit will =ncrease to 16% of GDP in
2015, from 1.5% in 2014, primarily reflecting the=sharp drop in oil prices As a follow-up to the below, it is also
interesting to look at playi=g the idea through FX.
q=pan>
USD/SAR is currently p=gged. While our base case is that the government will defend the peg, if h=adlines get worse,
revenues collapse from depressed oil prices and the gov=rnment has to address fiscal spending, we believe forward
points and volatility will continue to increase. Althou=h, it may be a low probability event that the government breaks
the peg, i= we look at Kazakhstan's actions in August (see chart below), we s=e buying USD call/ SAR put options as an
interesting risk reward.
</=pan>
USD/KZT lyr</=>
Source: Bloomberg 11/042015
Chart 2 below shows Saudi CDS
Syr Saudi CDS
1
EFTA_R1_01597340
EFTA02481071