EFTA00776903.pdf

From: Jeffrey Epstein <[email protected]> To: Paul S Barrett Subject: Re: 10 year swap spread Date: Mon, 22 Nov 2010 17:48:03 +0000 Inline-Images: image003.jpg size and move per basais point after one month taking into account libor???? On Mon, Nov 22, 2010 at 9:58 AM, Paul S Barrett < wrote: Swap Spread Idea: (Target entry at +9bps; currently at +15bps; target exit at +25bps) Currently the spread between the 10 year treasury (2.81%) and the 10 year swap (2.96%) is 15 BPs. This spread has widened from a historic low -5 BPs in early September. As shown in the 5 year chart below, spreads historically run around 40 BP. If we go back further, the chart tells the same story. With announced QE2, the economics of the 10 year treasury lead us to believe yields will likely remain capped while the swap market (represents the investor community) will be driven by economic data. If the Q4 consumer spending and profits numbers surprise to the upside, swaps would likely move higher relative to Treasury yields. To achieve this exposure we buy the 10 year treasury and pay fixed on a 10 year treasury swap. We would match the DVO1s making us hedged for equal shifts in UST vs swaps. You would borrow 95% of the Treasury cost at Libor + 75bps. ■last Price 15.75 Ifi,h en 00/07/06 46.00 Mope 41.2$ law 06 06/26/10 .5.75 2006 2007 2006 2400 2010 VSSDIG VSO 9.41, SDPIAD Sof: 10Y 6.1 wetily 11/11/OS to 11/10/10 Cot$44.< 2)10 citoonb.4.2 Fbmnt• I.P. 14,44w-2010 IS:27.11 EFTA00776903  This email is confidential and subject to important disclaimers and conditions including on offers for the purchase or sale of securities, accuracy and completeness of information, viruses, confidentiality, legal privilege, and legal entity disclaimers, available at http://www.jpmorgan.com/pages/disclosures/email. The information contained in this communication is confidential, may be attorney-client privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of Jeffrey Epstein Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return e-mail or by e-mail to [email protected], and destroy this communication and all copies thereof, including all attachments. EFTA00776904