Bank of America Merrill Lynch Cross‑Asset Trade Recommendations (Nov 2016)

Table 1: Current cross asset trades Asset Trade idea Strategist Long European Quality Yield Screen (yield) James Barty Long SXDP Index Ronan Carr Equities Long Nikkei Shusuke Yamada Long European index dividend futures James Barty Long MSCI Asia ex-Japan Ajay Kapur Long RTY short SPX 2y variance swap Nitin Saksena 3000-2850 SX5E put spread Dec 16 expiry James Barty Equity vol Long NKY short SPX Dec 18 variance swap Benjamin Bowler Long SX5E short SPX Dec 18 variance spread Abhinandan Deb Eurostoxx 2y/3y put calendar Abhinandan Deb Short EUR/SEK Kamal Sharma Long USD/CNY call Claudio Piron FX Short GBP/USD Kamal Sharma Long USD/AUD lan Gordon Long RUB/ZAR David Hauner 2s-5s-10s fly Shyam S.Rajan Fixed Income Short US 10y real rates Shyam S.Rajan Paying 5y GBP real rate swap Mark Capleton Buy 30y US |G Industrial spreads Hans Mikkelsen Credit Buy basket of Euro AT1s Barnaby Martin Long Xover short Main loannis Angelakis Source: BofA Merrill Lynch Global Research. For the full methodology and reference pricing please see Appendices. New trades in bold. Themes Long Cyclicality « Long Asia EM - recovering growth, earnings revisions and cheap valuation. ¢ Long Nikkei — growth picking up, JPY soft, 20k target. Bane Yield Long European dividend yield stocks — 5% yield, big pick up over IG credit. « Long Dec 18 SX5E dividend future — implies 4% drop from 2016, we see 4% rise. « Long basket of AT1s — high yield, equity cushion to rise. « Long XOver short Main — investors’ reach for yield to push them towards Crossover. ¢ Long basket of 30Y US industrial IG spreads — further spread compression. MEGEe the Fed/Trump 2-5-10 fly — 5Y part of the curve looks most vulnerable to Fed hiking. ¢ Short 10Y real yields — inflation breakevens have adjusted real rates have not. « Long USD - long via USD/GBP and USD/AUD, we think policy divergence will drive USD stronger if the Fed tightens as our economists expect. ¢ Long USD/CNH 7.6 6 month call — hedge against trade tensions Hedge the Rest e Weare long SX5E, NKY and RTY vs SPX variance. Carry positive, convex in a sell-off. « Long Dec 17/18 SX5E put spread. Long 3000-2850 Dec 16 put spread. Alpha Trades Long European Pharma. Sector discounting no pipeline, valuation back to cheapest since 2011. Solid yield too. ¢ Paying 5y UK real rates at -254bp. Implied inflation/rates inconsistent. ¢ Long RUB/ZAR (positive on oil, cautious on S African politics). ¢ Short EUR/SEK, strong Swedish growth, limiting room for Riksbank easing. Current trade recommendations 2 Global Cross Asset Strategy - Year Ahead | 30 November 2016 BankofAmerica <2” Merrill Lynch HOUSE_OVERSIGHT_014433