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BofAML GFSI™ X-Asset Risk Landscape GFSI makes new YTD lows as BoE & NFP boost risk assets The GFSI declined to a new YTD low of 0.18 as of 5-Aug, a level not seen since Nov-15. With the BoE surprising to the upside in terms of cutting rates, re-starting QE and guiding towards more accommodative policy down the line, as well as better than expected US non-farm payrolls, risk assets globally got a boost. « Credit experienced the biggest decline in stress across assets: Chart 3 shows that credit (followed by equities) experienced the biggest weekly stress decline. Indeed, Chart 5 and Chart 6 show that sovereign risk as measured by IG & sub-IG foreign sovereign bond spreads experienced the most significant weekly declines in stress versus their history in the GFSI. - Europe continues to be most stressed region: Chart 4 shows that Europe is the most stressed region in the GFSI, despite the stress declines last week. US- related stresses which were already relatively lower vs the other regions, were more resilient. Indeed the only significant move higher in regional stress was in USD Libor-OlS spreads (Chart 5), which our Rates strategists view as driven by the anticipation of US money market mutual fund reform in October. Chart 1: Latest* stress across GFSI sub-components 40 a2 . 3.0 4 & _Red shaded area highlights components in Bearish ™> Skew Green shaded area highlights components in - © A ‘ n : Bullish territo 2 2.0 = N Flow ry s » 10 a 5 (0.0 a T 20 Feaor “>oaewrwavreaeg ee eB5Q2aBBH OB BotCSESroneBPeeseeeEaSE BR ST TSG ES RBS ESEEESRRHSESRSCRERESSSEESASSSSSSRSEGZES arFHXHHr nm BH fFGHHHH eH FPHHKCUYU VDA Kee SBSH VoGaePsawowet guar iaw BSN EE ENDS SS ZS EPL HO DBE HREPBEGZMNME EL RREREXZSLPEBSESB S>To228 LSTFToBSBSLAEAOFOERS HBsrFntzAgqgs Sr -@sag Ora -~ S22 57>. 2 eanaeSHEZ SEXP BSS TET S2aEA SSS crESCPSsPSZESCCe2OH TESS eGe Ss<secxn ss 52h 5298 ee Boe eee ssa gsxstseeeerk SESCREBSE AZSPTESEQRSY SEORPS” TesS2tZG5Ht ASKSSSt*EEBH WED n SzEFoL > co uu 2S8ets oO oy © oO fo =>— vo = Me on? aEeSS” 2 fat Ene" 2 & 2 => Zo >Oo ¢ Ug 8 2 Qo E Q P ¢ F = ors sy ¢'¢€ oa Ss) 8 Oo oO uu n o ae £ = foe] Source: BofA Merrill Lynch Global Research. *Latest as of 05-Aug-16 Chart 2: Change** in stress across GFSI sub-components. The biggest moves were declines in stress; led by credit. Notably stress in GBP vol declined post BoE _ 06 30 2 : 2 @ a a 02 Cs 0-02 = Lo s NAN nD o fe F <-06 7 ' s cs] ' oO = ‘ o ° SEBTC ESBS SBS SE, ESA ETC ES BRS SES EESESESEBSHRESSES whe orgwrdodeds Lon & muda e D> 7u > x si > oO 2 aw iw wn an o 2 > Go 25> Beefy HOA <e2nnye aA 2 faa] PEL ESrx~LSsVSHVGEZTSePeege esse este svrasVFtEgzgsS ELVECERER > = c °o nm as Ww S vee = S SeRZFSSLS aL esSreePGeSOSoFs ee Gs Goa ESCRz Susser rtslPes3G SeZsASsEzseEssPEr-Esael ees esc esr ssh axXeePSz5gzegsssers > w Nae ea van ~~. SB OB ST SBS EE FE 5 = ue 2Feu < © @ PES IS eSEUSSeTSESSESescS see HSU 2H*%S B-758 8 22 = 2 $ = = # >oons 5 £0 n =o 2 a a = o E> a oO 5 ‘B 2 lo) 2&8 = zg pe erty Ew = > 8 3 cg oS = 5 £ 6 g g uw faa] a Ooo 8 g oD Source: BofA Merrill Lynch Global Research. **Latest as of 05-Aug-16. Change vs 1 week prior (29-Jul-16). Bankof America <> 2 Global Equity Volatility Insights | O09 August 2016 Merrill Lynch HOUSE_OVERSIGHT_025979