EFTA01457185.pdf

Deutsche Bank Securities Inc. 2015 Outlook Recommendations Trade Detail Rationale Risks Opened Entry Current P/L Further +5 bp Treasury Sell rich bond futures against The classic bond futures look rich in the outperformance of the 12/19/14 +21 bp (Closed on +1,249k RV cheep off-the-run bonds long end 6.25s of 5/2030 in the long end 2/251 Infladon Further decline in The 2yr2yr inflation appears attractive on a Buy 2yr2yr forward breakevens medium-term inflation 12/19/14 1.95% 2.03% +329k Swaps long-term history expectations The long end inflation market looks undervalued on a long-term perspective, Inflation markets Inflation Buy long end inflation 12/19/14 1.92% 1.91% -1,306 with the 30-year TIPS breakevens trading further underperform. below 2.00%. inflation Buy 5yr5yr forward breakevens The 5yr5yr forward breakevens have Decline in energy prices 12/19/14 2.18% 2.06% -206k as a hedge to high rates dropped to their multi-year lows. and a stronger dollar With the Fed moving closer to its first rate hike in a low-inflation, moderate-growth Higher implied vol ies Buy 3nc1y and 5nc6m callables environment, there are few themes as sure cheapens callables 12/19/14 A4enc vs. matched-maturity bullets as the flattening of the curve, likely going relative to bullets beyond the forwards. On the bullet agency curve, spreads are relatively tight to the level of rates volatility, Increased GSE risk Agencies 2-year vs. 5-year agency spread and they risk widening 5- l0bp from current widens intermediate 12/19/14 curve flattener levels on our model incorporating forward spreads vols and the projected level of outstanding debt. Widening of credit With CCC energy bonds trading at 60 cents spreads beyond the on the dollar, and oil just 510 away from breakeven point as well matching the most severe percentage drop us crecift US High Yield: Sell covered puts as a rally in credit in oil prices over 1997-8. our sense is that 12/19/14 on HY CDX beyond the breakeven, we may be reaching the latter stages of a with potentially pronounced move lower in a commodities- unlimited downside in driven decline in HY credit valuations either scenario San Deutiehe&reg CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0116607 CONFIDENTIAL SDNY_GM_00262791 EFTA01457185