HOUSE_OVERSIGHT_010611.jpg

The Bank of Mexico will meet on 29 September, and a 50bp rate hike is already priced in (Chart 4). A stronger hike, perhaps of 75bp, or a 50bp rate hike accompanied by a hawkish statement could lead to MXN strengthening in the very short run. Chart 3: Net speculative USD/MXN position in CFTC Chart 4: Bank of Mexico expected to hike 8 20 300 6 "9 250 4 18 >. 17 200 0 16 150 2 8 100 2 -4 14 8 12 0 kf ve 0 2013 2014 2015 2016 2012 2013 2014 2015 2016 mt Net Dollar position MXN mem spread —=—‘y TIIE -—=——=ONR Source: BofA Merrill Lynch Global Research, Bloomberg Source: BofA Merrill Lynch Global Research, Bloomberg Notable Rates and FX Research * Global Rates & Currencies 2016 Year Ahead, 23 November 2015 * USD/MXN builds momentum, FX Quant Trader, 19 Sep 2016 * Central banks still the only game in town, Global Rates and FX Weekly, 15 Sep 2016 * Land of the rising bond yield, US Rates Weekly, 16 Sep 2016 * Policy uncertainty, Liquid Cross Border Flows, 19 Sep 2016 Key trade ideas Top Rates and FX trades for 2016 For rationale and details, refer to Global Rates & Currencies 2016 Year Ahead: The “Great Divorce”, 23 November, 2015 Rates: Buy US 30y TIPS, entry: 1.2%, target: 70bp, stop loss: 1.55% Closed at 101bp (3 Mar 2016): Short USD 5y5y vs EUR 5y5y, entry: 115 bp, target: 160 bp, stop-loss: 90 bp (3 Sep 2015) Long $100mn 6m5y ATMF UK vs $100.75mn US rates straddles, net take-in: $126K, target: +450K, stop: -$225K Sell 3y Fannie Mae debt vs Treasuries, entry: 6bp, stop: 2bp, target: 20bp Closed at 11bp - Long 12m Treasury bills vs OIS, entry: 1bp, target: -10bp, stop: 7bp FX: Closed at 6.5630 (26 May 2016): Buy USD/CNH 6m forward outright, entry: 6.5260, stop: 6.40 Long a 12m USD/CNH forward outright, entry: 6.7485, target 7.00, stop: 6.67, current: 6.7420 (26 May 2016) Closed at 0% - Buy EUR/USD 3m 1.10 call with a 16 Dec 1.1050 window KO, cost: 0.55% EUR (spot: 1.0690) Buy ly EUR/USD<1.00, USD/JPY<120 dual digital, cost: 7.0% USD (spot: 1.0690, 122.80) Bankof America <> ee Merrill Lynch Liquid Insight | 22 September 2016 3 HOUSE_OVERSIGHT_010611