Strategic trade
Trade view / 22 September 2015 at 13:35 GMT

#SaxoStrats. UPDATE: Staying positive on Banco do Brasil

Fixed Income trader / Saxo Bank
Denmark
Instrument: BDORY:xnas
Price target:
Market price:
SaxoStrats


Since launching our trade view on Banco do Brasil, the situation in Brazil has further deteriorated following both political and economic concerns among investors.
Without disregarding the negative impact from the plunge in commodity prices, we believe the crisis is more political than it is economic, and as such much more manageable.
One of the main reasons behind the trade was our assumption that the Federal Reserve would be less likely to hike interest rates than what the market anticipated and in any case, would be likely to follow a very soft trajectory in normalising interest rates. This should clearly be supportive for emerging market bonds such as the USD-denominated corporate bonds of large Brazilian firms.
However, given the recent political turmoil and uncertainty – underlined and amplified by an S&P credit rating downgrade below investment grade status – these bonds have seen some selling pressure recently. 

We believe the speculated impeachment against incumbent president Dilma Rouseff as well as the possible replacement of the president of the central bank could push the country towards more market-oriented leadership and thus constitutes significant potential positive triggers.
In light of both this and the easier policy stance from the Federal Reserve confirmed last week - we re-iterate our positive view on this bond. 

You can read more about the background of our view in the upcoming Q4 edition of Saxo Bank's Essential Trades series.

— Edited by Michael McKenna

For more on bonds click here.

Non-independent investment research disclaimer applies. Read more

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail