EFTA01385916

Deutsche Bank Securities Inc. -o 0 2015 Outlook Recommendations Trade Detail Rationale Risks Opened Entry Current P/L Treasury RV Sell rich bond futures against cheep off-the-run bonds The classic bond futures look rich in the long end Further outperformance of the 6.25s of 5/2030 in the long end 12/19/14 +21 bp +5 bp (Closed on 2/251 +1,249k Infladon Swaps Buy 2yr2yr forward breakevens The 2yr2yr inflation appears attractive on a long-term history Further decline in medium-term inflation expectations 12/19/14 1.95% 2.03% +329k Inflation Buy long end inflation The long end inflation market looks undervalued on a long-term perspective, with the 30-year TIPS breakevens trading below 2.00%. Inflation markets further underperform. 12/19/14 1.92% 1.91% -1,306 inflation Buy 5yr5yr forward breakevens as a hedge to high rates The 5yr5yr forward breakevens have dropped to their multi-year lows. Decline in energy prices and a stronger dollar 12/19/14 2.18% 2.06% -206k A4enc ies Buy 3nc1y and 5nc6m callables vs. matched-maturity bullets With the Fed moving closer to its first rate hike in a low-inflation, moderate-growth environment, there are few themes as sure as the flattening of the curve, likely going beyond the forwards. Higher implied vol cheapens callables relative to bullets 12/19/14 Agencies 2-year vs. 5-year agency spread curve flattener On the bullet agency curve, spreads are relatively tight to the level of rates volatility, and they risk widening 5- l0bp from current levels on our model incorporating forward vols and the projected level of outstanding debt. Increased GSE risk widens intermediate spreads 12/19/14 us crecift US High Yield: Sell covered puts on HY COX With CCC energy bonds trading at 60 cents on the dollar, and oil just 510 away from matching the most severe percentage drop in oil as our prices over 1997-8. O sense is that may be reaching the latter stages of a pronounced move lower in a commodities- driven decline in HY credit valuations Widening of credit spreads beyond the breakeven point as well a rally in credit beyond the breakeven, with potentially unlimited downside in either scenario 12/19/14 San Deutiehe&reg CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0087384 SDNY_GM_00233568 EFTA01385916