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HONDURAS 6.25% 27 SWAP IDEAS

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HONDURAS 6.25% 27 SWAP IDEAS

HONDURAS 6.25% 27 SWAP IDEAS

August 22, 2020
BUY

TRITOB 4.375% 2024 or DOMREP 5.5% 2025

USP93960AF25 or USP3579EBD87
SELL

HONDUR 6.25% 2027

USP5178RAC27

Related reports:

The tightening in Republic of Honduras 6.25% 2027 bonds (HONDUR 27s, B+) from 450bps in mid-July to 354bps now makes them look expensive relative to other sovereign issuers in Latam.

The biggest dislocation is against Republic of Trinidad and Tobago 4.375% 2024 bonds (TRITOB 24s, BB+), where the spread difference has narrowed from an average of -134bps to -36bps (2.16 standard deviations). TRITOB 24s being 3 years shorter and rated 3 notches higher, this is a defensive trade to increase credit quality and reduce duration at a low cost.

Holders of the HONDUR 27s looking to pick up spread could alternatively switch to Dominican Republic 5% 2025 bonds (DOMREP 25s, BB-). Two years shorter and 1 notch better rated, DOMREP 25s currently offer a pick up of 51bps against an average of -14bps (1.21 standard deviations).

A Trader's View

Katana Labs
,
July 8, 2020

HCOB'22 vs SOCGEN '22 - 08.07.20

Katana Labs
,
June 25, 2020

European Financials 25.06.20

Trade ideas

Dislocation in JPM vs BofA

Dislocation in JPM vs BofA

January 18, 2021
BUY

JPM 2 83/1000 22/04/2026

US46647PBK12
SELL

BAC 3 93/1000 01/10/2025

US06051GGT04

Related reports:

The spread between JP Morgan 2.083% 2026 (JPM 26's, A) and Bank of America 3.093% 2025 (BAC 25's, A) has increased to its highest level. While JPM 26's have on average traded under BAC 25's, it currently trades 10bps wider (2.8 standard deviations). Holders of BAC 25's have the opportunity to take profits at 38bps and switch into the JPM 26's at 49bps, increasing carry and potentially generating alpha were the spread difference to return to the mean.

Link to this idea...
Update - Dislocation in General Motors Financial Company Curve - 10 basis point reversion since initial post

Update - Dislocation in General Motors Financial Company Curve - 10 basis point reversion since initial post

January 15, 2021
BUY

GM 2 3/4 20/06/2025

US37045XCX21
SELL

GM 3 1/2 07/11/2024

US37045XCD66

Related reports:

Update on Trade Idea posted earlier this week -
Spread difference on Long GM 2.75% 2025/ Short GM 3.5% 2024 trade idea has reverted 10 basis points since initial post.

Link to this idea...
Inversion in Long-dated US Utilities

Inversion in Long-dated US Utilities

January 14, 2021
BUY

ETR 3 3/4 15/06/2050

US29364GAK94
SELL

NI 4 4/5 15/02/2044

US65473QBC69

Related reports:

The spread difference between Entergy Corporation 3.75% 2050 (ETR 50's, BBB) and NiSource Inc. 4.8% 2044 (NI 44's, BBB) has inverted. ETR 50's have historically traded tighter than NI 44's, on average by 15bps, but currently trade 8bps wider (2.7 standard deviations). Holders of NI 44's have the opportunity to increase carry and profit from a potential 23bps reversion were the spreads return to their historical difference.

Link to this idea...
Dislocation in Long-dated BBB US Credit

Dislocation in Long-dated BBB US Credit

January 13, 2021
BUY

CHTR 5 3/4 01/04/2048

US161175BN35
SELL

WBA 4 1/10 15/04/2050

US931427AT57

Related reports:

Sharp tightening in Walgreens Boots Alliance 4.1% 2050 (WBA 50's, BBB) make them look expensive against other BBB credits. Katana identifies the largest dislocation against Charter Communications Operating 5.75% 2048 (CHTR 48's, BBB-), which has on average traded 12bps over WBA 50's and currently trades 43bps over (2.8 standard deviations). Holders of WBA 50's have the opportunity to take profits at 217bps and switch into CHTR 48's at 259bps, with a potential reversion of 31bps were the spread difference to return to the mean.

Link to this idea...
Dislocation in General Motors Financial Company Curve

Dislocation in General Motors Financial Company Curve

January 12, 2021
BUY

GM 2 3/4 20/06/2025

US37045XCX21
SELL

GM 3 1/2 07/11/2024

US37045XCD66

Related reports:

The spread difference between General Motors Financial Company 2.75% 2025 (GM 25's, BBB-) and the 3.5% 2024 (GM 24's, BBB-) has increased sharply. Both bonds have historically traded within 10bps of each other and on average GM 25s have traded 1bps tighter but currently trade 20bps wider (3.15 standard deviations). Holders of GM 24's have the opportunity to take profits on the recent tightening and switch into GM 25's for higher carry and potential reversion of 21bps.

Link to this idea...
In the Money: BP Capital Markets America vs Enterprise Products Operating

In the Money: BP Capital Markets America vs Enterprise Products Operating

January 12, 2021
BUY

BPLN 2 937/1000 06/04/2023

US10373QBH20
SELL

EPD 3 3/4 15/02/2025

US29379VBE20

Related reports:

On 22 December we published the trade idea to buy BP Capital Markets America 2.937% 2023 (BPLN 23's, A) and sell Enterprise Products Operating 3.75% 2025 (EPD 25's, BBB+) at a spread difference of 6bps. Since then the spread difference has compressed by 19bps.

Link to this idea...
Inversion in US Financials

Inversion in US Financials

January 11, 2021
BUY

MET 4 11/20 23/03/2030

US59156RBZ01
SELL

KKR 3 3/4 01/07/2029

USU49495AA91

Related reports:

The spread difference between MetLife 4.55% 2030 (MET 30's, A-) and KKR Group Finance Co. VI 3.75% 2029 (KKR 29's, A) has been inverted. MET 30's have on average traded 38bps under, but as KKR 29's have tightened the spread is now 3bps over (2.15 standard deviations). Holders of KKR 29's have the opportunity to take profits at 73bps and switch into MET 30's at 76bps.

Link to this idea...
In the Money: Bank of America and AT&T Curve Dislocations Corrected

In the Money: Bank of America and AT&T Curve Dislocations Corrected

January 8, 2021
BUY

BAC 3 183/500 23/01/2026, T 3 13/20 01/06/2051

US06051GGZ63, US00206RKA94
SELL

BAC 2 57/125 22/10/2025, T 3 3/10 01/02/2052

US06051GHW24, US00206RKE17

Related reports:

The dislocations in Bank of America and AT&T curves identified earlier this week have been corrected. On Monday we published an idea to buy Bank of America 3.366% 2026 and sell the 2.456% 2025 at a spread difference of 35bps. The spread narrowed to 1bps the day after and is currently at 15bps.

On Tuesday we identified an idea to buy AT&T 3.65% 2051 and sell the 3.3% 2052 at a spread difference of 22bps. The spread has come back all the way to 2bps and is currently at 7bps.

Link to this idea...
Reversion Opportunity of 70bps in US MidstreamEnergy

Reversion Opportunity of 70bps in US MidstreamEnergy

January 6, 2021
BUY

EPD 4 3/20 16/10/2028

US29379VBT98
SELL

MPLX 4 1/4 01/12/2027

US55336VBN91

Related reports:

The spread difference between Enterprise Products Operating 4.15% 2028 (EPD 28's, BBB+) and MPLX 4.25% 2027 (MPLX 27's, BBB) has been inverted. EPD 28's have on average traded 67bps tighter than MPLX and currently trade 4bps wider (2.8 standard deviations). Holders of MPLX have the opportunity to take profits at 89bps and switch into the better-rated EPD at 93bps, with potential alpha of 70bps where the spread difference return to the mean.

Link to this idea...
Dislocation in AT&T Curve

Dislocation in AT&T Curve

January 5, 2021
BUY

T 3 13/20 01/06/2051

US00206RKA94
SELL

T 3 3/10 01/02/2052

US00206RKE17

Related reports:

The spread between AT&T 3.65% 2051 (T 51's, BBB) and 3.3% 2052 (T 52's, BBB) has increased sharply as the T 52's tightened while the T 51's widened. The T 51's have on average traded 3bps over the T 52's and currently trade 22bps over (3.3 standard deviations). Holders of T 52's have the opportunity to take profits at 191bps and switch into the T 51's at 213bps, increasing carry and potentially generating alpha of 19bps where the spread difference return to the average.

Link to this idea...
Dislocation in Bank of America Curve

Dislocation in Bank of America Curve

January 4, 2021
BUY

SELL

Related reports:

The spread difference between Bank of America Corporation 3.366% 2026 (BAC 26's, A) and 2.408% 2025 (BAC 25's, A) bonds has widened sharply. BAC 25's have tightened from 44bps to 16bps, while BAC 26's have remained stable at 51bps. The spread difference, which on average on average has been 6bps during the last 12 months hans increased to 35bps (2 standard deviations). An opportunity for holders of BAC 25's to take profits and increase carry.

Link to this idea...
Spread Inversion in US Energy

Spread Inversion in US Energy

December 22, 2020
BUY

BPLN 2 937/1000 06/04/2023

US10373QBH20
SELL

EPD 3 3/4 15/02/2025

US29379VBE20

Related reports:

The spread between BP Capital Market America Inc. 2.937% 2023 (BPLN 23's, A) and Enterprise Products Operating LLC 3.75% 2025 (EPD 25's, BBB+) has been inverted in the last week. BPLN 23's have on average traded 29bps tighter to EPD 25's but is currently trading 6bps over (3 standard deviations). Holders of EPD 25's have the opportunity to take profits at 28bps and switch into the better-rated BPLN at 34bps, with expected compression of 35bps were the spread difference to return to the mean.

Link to this idea...
Dislocation in Long-date US Utilities

Dislocation in Long-date US Utilities

December 21, 2020
BUY

BRKHEC 4 1/2 01/02/2045

US084659AF84
SELL

WTRG 3 351/1000 15/04/2050

US29670GAE26

Related reports:

The spread difference between Berkshire Hathaway Energy Company 4.5% 2045 (BRKHEC 45's, A-) and Essential Utilities, Inc. 3.351% 2050 (WTRG 50's, BBB) has increased to the highest level in the last 12 months. While BRKHEC 45's have on average traded 6bps under WTRG 50's, they currently trade 16bps over (2.4 standard deviations). Since mid-November, when both credits traded at 160bps, WTRG 50's have tightened to 145bps while BRKHEC 45's have widened to 161bps.

Link to this idea...
Spread Inversion in US Utilities

Spread Inversion in US Utilities

December 18, 2020
BUY

PPL 4 1/8 15/04/2030

US69352PAQ63
SELL

NRG 3 3/4 15/06/2024

USU66962AR90

Related reports:

The spread difference between PPL Capital Funding Inc. 4.125% 2030 (PPL 30's, BBB) and NRG Energy Inc. 3.75% 2024 (NRG 24's, BBB-) is inverted. While PPL 30's have on average traded 14bps through NRG 24's, they currently trade 30bps over (2.1 standard deviations). Holders of NRG 24's can take profits at 74bps and switch into PPL 30's at 104bps, with an expected compression of 44bps if the spread difference returns to the mean.

Link to this idea...
Dislocation in Long-dated US Industrials

Dislocation in Long-dated US Industrials

December 17, 2020
BUY

RTX 3 1/8 01/07/2050

US75513EAC57
SELL

CAT 5 1/5 27/05/2041

US149123BS95

Related reports:

The spread difference between Raytheon Technologies Corporation 3.125% 2050 (RTX 50's, BBB+) and Caterpillar Inc. 5.2% 2041 (CAT 41's, A) has widened sharply. RTX 50's have on average traded 3bps over CAT 41's, however as CAT 41's tightened RTX 50's have widened, increasing the spread difference to 25bps (2.2 standard deviations). Holders of CAT 41's have the opportunity to take profits at 113bps and switch into RTX 50's at 138bps, with a potential compression of 22bps were the spread difference return to the mean.

Link to this idea...
Dislocation in Norfolk Southern Corp Curve

Dislocation in Norfolk Southern Corp Curve

December 15, 2020
BUY

NSC 3 471/500 01/11/2047

US655844BX50
SELL

NSC 4 837/1000 01/10/2041

US655844BH01

Related reports:

The spread difference between Norfolk southern Corporation 3.942% 2047 (NSC 47's, BBB+) and the 4.837% 2041 (NSC 41's, BBB+) has inverted. NSC 47's have traded 4bps tighter than the NSC 41's on average during the last 12 months. Since early December the spread has inverted and currently NSC 47's trade 19bps over the NSC 41's (2.8 standard deviations). Holders of fNSC 41's have the opportunity to take profits on the recent tightening at 128bps and switch into the NSC 47's at 147bps, with an expected reversion of 23bps where the spread difference to return to the mean.

Link to this idea...
CNOOC Widens Against Sinopec

CNOOC Widens Against Sinopec

December 14, 2020
BUY

CNOOC 4 7/8 30/04/2044

US12591DAD30
SELL

SINOPE 4 3/5 12/09/2048

USG82016AD15

Related reports:

The spread in long-dated CNOOC and Sinopec bonds has widened in the last weeks, but CNOOC has moved further. While the credit spread of Sinopec Group Overseas Development (2018) Ltd 4.6% 2048 bonds (SINOPE 48's, A+) has increased by 10bps since mid-November, that of CNOOC Finance (2014) ULC bonds (CNOOC 44's, A+) has moved by 40bps. Over the last 12 months CNOOC 44's have traded 2bps wider to SINOPE 48's; the difference has increased to 31bps (3.9 standard deviations).

Link to this idea...
Spread Inversion in Long-dated US Financials

Spread Inversion in Long-dated US Financials

December 10, 2020
BUY

WFC 5 13/1000 04/04/2051

US95000U2M49
SELL

PRU 4 7/20 25/02/2050

US74432QCE35

Related reports:

Wells Fargo & Company 5.013% 2051 bonds (WFC 51's, A) have traded 14bps tighter than the Prudential Financial 4.35% 2050 bonds (PRU 50's, A-) on average during the last 12 months. As the spread on PRU 50's has narrowed faster since early November, the difference has been inverted and currently WFC 51's trade 17bps over (2.6 standard deviations). Holders of PRU 50's have the opportunity to take profits at 150bps and switch into the 1-notch-better-rated WFC 51's at 157bps.

Link to this idea...
A month later: PM vs ABIBB, IBM vs QCOM and MRK vs UNH in the Money

A month later: PM vs ABIBB, IBM vs QCOM and MRK vs UNH in the Money

December 9, 2020
BUY

PM 4 3/8 15/11/2041, IBM 5 3/5 30/11/2039, MRK 4 0 07/03/2049

US718172AM11, US459200GS40, US58933YAW57
SELL

ABIBB 4 7/20 01/06/2040, QCOM 3 1/4 20/05/2050, UNH 2 9/10 15/05/2050

US035240AS95, US747525BJ18, US91324PDZ27

Related reports:

We revisit three trade ideas from a month ago.

On November 6 we identified a dislocation between Philip Morris International 4.375% 2041 (PAM 41's, A) and Anheuser-Bush Inbev Worldwide 4..35% 2040 (ABIBB, BBB+). The spread difference has narrowed from +6bps over to -10bps.

On November 10 we identified that Qualcomm 3.25% 2050 (QCOM 50's, A-) was trading tight to IBM Corp. 3.6% 2039 (IBM 39's, A). The spread difference has narrowed from 36bps to 21bps.

On November 12 we identified that Merk & Co 4% 2049 (MRK 49's, A+) was trading wide to UnitedHealth Group Inc. 2.9% 2050 (UNH 50's, A). The spread difference has narrowed from 6bps to -2bps.

Link to this idea...
Dislocation in Walgreens Boots Alliance Curve

Dislocation in Walgreens Boots Alliance Curve

December 8, 2020
BUY

WBA 4 13/20 01/06/2046

US931427AR91
SELL

WBA 4 1/10 15/04/2050

US931427AT57

Related reports:

Sudden widening in Wall Greens Boots Alliance spreads has resulted in a significant dislocation in the curve. While the the credit spread on the 4.65% 2046 bonds (WBA 46's, BBB) has gone from 254bps to 291bps, the 4.1% 2050 bonds (WBA 50's, BBB) have only widened from 240bps to 257bps. The WBA 46's have traded 13bps over the WBA 50's on average during the last 12 months and currently trade 34bps over (3.3 standard deviations). Holders of WBA 50's have the opportunity to increase their carry and could generate 22bps of alpha were the spread difference revert to the mean.

Link to this idea...