EFTA01451410.pdf

Subject: Re: Jeffrey - Mexico -> MBONO 30y look interesting [C] agreed lets do 3m On Tue, Jan 14, 2014 at 4:23 AM. Vinit Sahni <[email protected]> wrote: Classification: Confidential Jeffrey - was looking for value in the EM space, post the PDVSA analysis, started looking at Mexico... here is a trade I think makes sense -> buying MBONO 30y unhedged At around 7.5% yield, inflation probably in the 3-4% in the foreseeable future, and USD/MXN likely stable or stronger in real (deflated) terms, I think it is good value. The curve is steep. If you look at 10Y10Y UST and 10Y10Y MXN yields, the spread is above 500bp . Say inflation differential is 100bp higher in Mex and credit diff is 100bp (10Y CDS is about 100bp higher in Mexico although Mex has much better debt dyn), this still leaves about 300bp of cushion for real depreciation per year...ln sum, it seems good value near term mark to market risk is slower pace of implementation of energy reform and a selloff in USTs happy to discuss further if u find interesting... <0.54CC.gif≥ CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0 107994 CONFIDENTIAL SDNY_GM_00254178 EFTA01451410