Trade Examples

Attached are recent examples of trade advisory ideas we sent to our clients.


Blended 5y5y basket GBP/CAD/EUR

A cross ccy idea I think warrants attention.. take a look at this blend of 5y5y cross currency, seems a good way to box the recent sell off in EUR( with CAD )  against GBP.

The range seems relatively well respected over the last 10yrs and we have moved from the low end ( Jan 2015)  to the top end  in the last  5 months

TRADE PAY GBP 5y5y 100% and against it Receive 5y5y EUR in 40% and Receive 5y5y CAD 60%

CAD 5y5y 3.14

EUR 5y5y 1.95

GBP 5y5y 2.71

(0.6*CAD+0.4*EUR)-GBP last -4 rolls to -20 (+16) after 1 year then to -38, -43 -65 and spot 5y box with our weights is -61


Look at how the blended EUR + CAD is corr to GBP overlain on the right hand scale … this relationship is surprisingly strong

The blended EUR + CAD overlain on GBP rhs


The box we are suggesting PAY GBP 5y5y v Rec EUR 40% and CAD 60% in 5y5y has decent roll on the box over the first year 


You can see when decomposing the box into EUR v GBP and CAD v GBP what we are playing

EUR is by far the most volatile leg hence the underweight


Clearer on the recent timeframe


This shows the individual 5years in forward space where x axis is the forward start so where x = 5 this is 5y5y

GBP , EUR and CAD. We are paying the GBP 5y5y and receiving EUR and CAD in weights 0.4 and 0.6 respectively , roll is +ve to where x axis = 1 ( 1y5y box) a total of 58bp form the dotted entry line


Our PCA weights versus the 50/50    CAD / EUR v GBP version

The symmetric weights for reference 0.5/0.5/-1 last -16 rolls to -31 (+15) right hand scale

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