EFTA02533307.pdf

From: Jeffrey Epstein <[email protected]> Sent: Monday, November 22, 2010 7:42 PM To: Paul S Barrett Subject: Re: 10 year swap spread what is three month libor and why is the spread so high on treasury.? On Mon, Nov 22, 2010 at 2:41PM, Paul S Barret= <[email protected] <mailto > wrote: Example Buy 10MM of the 10yr treasury with a 2.625% coupo= (ytm 2.97%) =A0 Borrow $9.5MM at 3month Libor + 75bps =A0 =AO =A0 Pay fixed on $9.6=MM on a 10yr swap Annual negative carr= (per 10MM notional) = $84,000 Monthly negative carry (per 10MM notional) = $7,000 $ value per basis point = $8,800 per basis point =A0 So we need the spread to move lbp/month in our favor to cover the neg=tive carry. Therefore if we put the trade on at +9bps and we move to 0bps spread =e lose (1bp of carry PLUS 9 bps of DV01) 10bps or $88,000 per 10MM.=/p> Therefore if we put the trade on at +9bps and we move to 19bps spread=we make (-lbp of carry PLUS 10bps of DV01) 9bps or 79,200 per 10MM.=/p> Attached spreadsheet shows more details.</=> 1 EFTA_R1_01677468 EFTA02533307  This is a trade we would only do at +9. If we don't get there we don=#39;t do the trade. Paul =/span> Paul Barrett, CFA Managing Director Global Investment Opportunities Group=/p> JPMorgan Private Bank 40W 57th Street, 33rd Floor, New York, NY 10=19 <mailto => From:=span style="font-size: l0pt;"> Jeffrey Epstein Imailto:[email protected] Monday, November 22, 2010 12:48 PM To: Paul S Barrett Subject: Re: 10 year swap spread=/p> size and move per basais point after one month taking in=o account libor???? On Mon, Nov 22, 2010 at 9:58 AM, Paul S Barrett=< <mailto > wrote: <=pan style="font-size: 11pt; color: rgb(31, 73, 125);">Swap Spread Idea:=A0 (Target entry at +9bps; currently at +15bps; target exit at +25bps) 1%) and the 10 year swap (2.96%) is 15 BPs. This spread has widened fro= 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, th= chart tells the same story. 2 EFTA_R1_01677469 EFTA02533308  With announced QE2, the =conomics of the 10 year treasury lead us to believe yields will likely remain capped while the swap m=rket (represents the investor community) will be driven by economic data. If the Q4 consumer spending and profit= numbers surprise to the upside, swaps would likely move higher relative t= Treasury yields. To achieve this exp=sure we buy the 10 year tr=asury and pay fixed on a 10 year treasury swap. We would match the DVOls making us hedged for equal shifts in UST vs swaps.=A0 You would borrow 95% of the Tr=asury cost at Libor + 75bps. =AO =AO =AO This email is confidential and subject to important disclaimers an= conditions including on offers for the purchase or sale of securities, ac=uracy and completeness of information, viruses, confidentiality, legal pri=ilege, and legal entity disclaimers, available at http://www.jpmorgan.c=m/pages/disclosures/email <http://www.jp=organ.com/pages/disclosures/email> . ***** ** 4, •* • 4.• = The information contained=in this communication is confidential, may be attorney-client privilege=, may constitute inside information, and is intended only for the use of the a=dressee. It is the property of Jeffrey Epstein Unauthorized use, di=closure or copying of this communication or any part thereof is strictl= prohibited and may be unlawful. If you have received this communication in error, p=ease notify us immediately by return e-mail or by e-mail to [email protected], =nd destroy this communication and all copies thereof, including all attachm=nts. This email is confidential and subject to important disclaimers and conditi=ns including on offers for the purchase or sale of securities, accuracy an= completeness of information, viruses, confidentiality, legal privilege, a=d legal entity disclaimers, available at http://www.jpmorgan.com/pages/=isclosures/email <http://www.jpmorgan.co=/pages/disclosures/email> . The information containe= in this communication is confidential, may be attorney-client privileg=d, may constitute inside information, and is intended only for the use of the a=dressee. It is the property of Jeffrey Epstein Unauthorized use, di=closure or copying of this communication or any part thereof is strictl= prohibited and may be unlawful. If you 3 EFTA_R1_01677470 EFTA02533309 have received this communication in error, p=ease notify us immediately by return e-mail or by e-mail to [email protected], and destroy thi= communication and all copies thereof, including all attachments. 4 EFTA_R1_01677471 EFTA02533310