EFTA01802915

From: Barrett, Paul S Sent: Thursday, March 24, 2016 7:03 PM To: Brad Wechsler Cc: Jeffrey Epstein ([email protected]); Barrett Team Subject: BRL Trade Idea Brad The spread between Brazilian Government yields and Pe=robras has blown out from 100bps in June '15 to around 500bps to=ay for their USD bonds. Our view is that the government will backstop Petro=ras and will not allow it to default on its debt (Govt net reserves = $200bIn ; Petrobras debt notional = $105B=n). We think it makes sense to play for the spread to compress back to 300-=00bps. We can execute this through a long PETBRA position an= buying protection on 5 yr BRL CDS to reduce risk. Details below. 1. &n=sp; Spread Trade - CDS leg reduces risk in fir=t option Buy Petrobras bonds are y=elding —10% Buy Brazil CDS costs 3.96= The bet is that spreads t=ghten (see green chart below). Source: Bloomberg 3/2=116 5yr Petrobras & 5yr Brazil CDS: </=:p> Buy EFTA_R1_00145880 EFTA01802915 Buy CDS Protection Bond: PETBRA 5 % 01/27/21 Contract: Brazil Syr CDS Issuer: PETROBRAS GLOBAL FINANCE Underlying Issuer: Federative Republic of Brazil ISIN: Maturity: 06/20/21 Ratings: B3/B+/BB+ Coupon: 100 bps Ranking: Sr Unsecured Spread: 396 bps Price: $83.00 Upfront Pmt (per $10mm): - 1,329,935 USD YTW: 2 EFTA_R1_00145881 EFTA01802916 9.88% Initial DV01 (per $10mm): 4,051 USD Z-spread: 861 bps Duration: 3.37 Source: Bloomberg 3/2=116 <=pan style="font-size:8.0pt;font-family:"Verdana","sans-ser=f";colorlISFSFSF;mso-fareast-language:EN- US"> <=pan style="font-size:8.0pt;font-fami ly:"Verdana","sans-ser=f";colorlt 1F497 D;mso-fareast-language:EN-US">Paul Barrett I Managing Direct=r I Global Investment Opportunities Group I J.P. Morgan Securities LLC I J.P. Morgan Private Bank I =1.P. Morgan Chase Bank N.A. NOT AN OFFICIAL CONFIRMATION= For informational purposes only. This report does not represe=t an official account of the holdings, balances, or transactions made in yo=r account and is being provided at your request. Please refer to your monthly account statement for the=official record of all of your account activities. For question, plea=e call your J.P. Morgan representative. <=p> In discussion of options and other strat=gies, results and risks are based solely on hypothetical examples cited; ac=ual results and risks will vary depending on specific circumstances. Investors are urged to consider carefu=ly whether option or option-related products in general, as well as the pro=ucts or strategies discussed herein are suitable to their needs. In actual=transactions, the client's counterparty for OTC derivatives applications is JPMorgan Chase Bank, N.A., and affiliat=s. For a copy of the "Characteristics and Risks of Standardized Option=" booklet, please contact your JPMorgan Advisor. This email is confidential and subject to important dis=laimers and conditions including on offers for the purchase or sale of securities, accuracy and completeness of=information, viruses, confidentiality, legal privilege, and legal entity 3 EFTA_R1_00145882 EFTA01802917 di=claimers, available at http://www.=pmorgan.com/pages/disclosures/email <http://www.jpmorgan.com/pages/disdosures/email> . This email is confidential and subject to important disclaimers and conditio=s including on offers for the purchase or sale of securities, accuracy and=completeness of information, viruses, confidentiality, legal privilege, and=legal entity disclaimers, available at http://www.jpmorgan.com/pages/disclosures/email <http://www.jpmorgan.com/p=ges/disclosures/email> <=span> 4 EFTA_R1_00145883 EFTA01802918