m rates, fx and commodities research 25 february 2016 · weaker mxn to 19.15 by end-q2, but...

1

25 February 2016 | TD Securities

Global Markets Rates, FX and Commodities Research

Highlights

The TD View …………………………. 2

The View From the Top ………... 3

Country Snapshots US ………………………………………... 6 Canada ………………………………… 7 Australia……………………………….. 8 New Zealand………………………… 9 Eurozone………………………………. 10 UK……………………………...………… 11 Scandies……………………………….. 12 Switzerland/Japan………………… 13 EMEA……………………………………. 14 LATAM………………………………….. 15 EM Asia………………………………... 16

Analytics at a Glance…………..…. 17

Forecasts ………………………………. 20

TD 15Q4 FORECASTS

2 5 10 30 2 5 10 30 2 5 10 30 2 5 10 2 5 10

UK CA US NZ AU

£/$

$/¥

€/N

OK

$/C

HF

€/$

AU

D/$

$/C

AD

€/S

EK

DX

Y

NZ

D/$

$/T

RY

$/Z

AR

$/P

LN

$/B

RL

$/IN

R

$/M

YR

$/ID

R

$/M

XN

$/H

UF

$/R

UB

WT

I

Bre

nt

Pall

NatG

Lead

Zin

c

Silver

Pla

t

Go

ld

Co

p

G

1

0

F

X

E

M

F

X

C

O

M

M

O

D

I

T

Y

R

A

T

E

S

0

10

20

30

40

50

60

70

80

90

-8

-6

-4

-2

0

2

4

6

% from spot

-20

-15

-10

-5

0

5

10

15

20

0

25

50

75

Bps from spot

China’s ability to warehouse manufacturing vol is gone and their contribution to global demand recedes. Meanwhile, bank b/s remain less able to warehouse market risks. Markets disagree on the underlying problems and possible solutions, but global econo-my is better than markets fear, but worse than US fundamentals appear in isolation.

G10 MACRO

US: Short front end Treasuries, long 10yr TIPS BEs. EUR: ERZ6/ERZ7 flattener and outright 2y short gilts. CAD: 2s10s bear steepening. AUD: 10y capped at 2.75%.

G10 RATES

We remain bullish JPY while the USD should retain a firm tone amid weakness in other major currencies.

G10 FX

Dented risk appetite and vol are variables for EMs to deal with. High yield continues offering protection, but not against extreme vol.

EMFX & RATES COMMODITIES

THE VIEW FROM 10,000 FEET

Oil oversupply price pressure remains as talks fail, weak US data keeps Fed on hold & equity markets shaky, attracting flows to precious metals.

`

Global

policy

Echoes of 15Q3: Ongoing

elevated market turmoil and

heightened uncertainty over

EM growth has made policy

makers nervous about growth

and inflation prospects.

We have pushed out our timing for the next

Fed hike to at least June, which should be

followed by another hike by December.

EM FX

S&P downgrade of Poland from

A-(positive) to BBB+(negative)

on political risks. Fitch and

Moody's may follow on back of

bank tax and forced FX

mortgage conversions.

EMFX forecasts unchanged. 35bp cut of the

Hungary base rate & another 25bp in Poland.

We still think CBRT will hike 250bp this year,

but this will follow an attempt to ease, an

ultimate policy mistake, by 50bp in May after

the new CBRT governor is appointed.

What Has Changed What We've Changed

2

Global Markets 25 February 2016 | TD Securities

THE TD VIEW

Trading Bias

Macro Outlook Rates FX Key Risks

US

The economic recovery shows

signs of positive momentum, with

GDP expected to rebound to an

above-2.0% pace.

With markets underpricing further

2016 hikes, we look to sell front

end Treasuries.

Tepid US growth and a cautious

Fed temper USD's upside, but a

lack of alternatives (except the

JPY) helps keep it firm.

Risks to domestic growth and

inflation skewed to the downside,

expect Fed to stay on hold till

June.

Canada

Q1 growth forecast to rebound

from a weak finish to 2015. Peak

pessimism has faded with Bank

of Canada on hold for now.

We are buyers of 2s above 45

bps, but 2s10s are too flat. We

expect to see the curve bear

steepen on better economic data.

Awaiting Federal Budget.

Contained within a range of

1.3650/1.4050.

Slower US growth,

underwhelming fiscal policy, and

disconnect between CAD & oil

pose a challenge.

Europe

Uncertainty around the ECB,

Brexit contagion (Frexit etc),

weak wage pressure despite

improving labour markets.

Periphery spreads wide, look for

them to tighten. Curve flattens on

bund scarcity.

We still favour the SEK as the

GBP and EUR remain under

pressure

Uncertainty around the ECB,

Brexit contagion (Frexit etc),

weak wage pressure despite

improving labour markets.

Asia-Pac

Low inflation assisted by excess

capacity and low wages growth,

but employment and housing

remain solid

Bond yields low as at least one

rate cut has been priced back in,

but not looking rich yet, We are

better buyers of weakness.

The AUD & NZD can rally further-

high hurdle for the RBA and

RBNZ to cut, US recession risk &

competitive FX devaluation.

Fed on hold for longer prompts

RBA and RBNZ to cut; China's

lack of conviction to open

markets prolongs volatility

Latam

Brazil unlikely to gain traction

until fiscal probity is assured.

Banxico’s focus on MXN will

restrain growth momentum.

Brazil to ease in Q4; curve has

yet to price this. Mexico may

flatten further if MXN stabilizes.

Carry to compensate over next

12m for adverse moves in BRL

spot. Weaker MXN to 19.15 by

end-Q2, but stronger afterwards.

EM volatility continues.

Prolonged risk aversion on CNY

depreciation or outright

devaluation which causes market

disorder.

EMEA

Fundamentals good in CE3, but

political risks in Poland. High CPI

in Turkey. Russia driven by oil. S.

Africa still ailing.

With dovish CBs and ECB,

steeper Poland and Hungary

curves; more inverted in Turkey

on rate hikes; flatter in S. Africa.

We like long USDTRY and long

USDZAR. USDRUB shorts to

play expected oil recovery. Short

PLNHUF.

Fed rate hikes sooner than

expected. Politics, particularly in

Russia, Turkey and now Poland.

ECB policy missteps. China.

Asia

Growth to hit the brakes further in

China, mild acceleration in

India/Indonesia, but slower in

Malaysia. Low CPI pressures.

Despite the bias for easing rates,

curves may remain flat as

markets already expect easing

from key regional CBs.

CNY set for steady depreciation

this year and next. Other AxJ

currencies to stay weak vs USD

until Q3/Q4.

China reserve burn is

unsustainable and PBoC free

floats the currency, though this is

of lower probability currently.

Energy

Oversupply continues, as

OPEC/non-OPEC "freeze" deal

fails, while waning US production

not enough to lift oil materially.

Excessive flow of Iran oil into the

mkt could hit prices, while a

surprise OPEC sentiment shift

could spark short-covering.

Precious

metals

US data disappointments

continue to keep Fed hikes off

the table and shaky equity

markets support precious bid.

Stronger US data along with

inflation prompts Fed to maintain

strong bias to hike in 2016.

Other

metals

Chinese stabilization and

renewed import demand triggered

optimism on potential for demand

turnaround.

China stimulus is ineffective and

demand growth does not

materialize as expected,

prompting metals to correct.

G

1

0

E

M

C

O

M

M

O

D

I

T

Y

Neutral on oil

Long gold

Long zinc & copper

CENTRAL BANK MONITOR

Inflation Central Bank Policy RateDeviation from target* (% points) Y/Y% As of Next Last Mtg Current Next Mtg 12m Fcast (bps∆ from spot)

Print Date Change % Date TD Mkt TD

Below Target Above Target

*Deviation from avg since 2007 for India, which does not have an inflation target.

-38 +0

Japan 0.2 Dec 25 Feb 29 Jan +0bp 0.10 15 Mar

+0bp 2.75 10 Mar +0NZ 0.1 Dec 18 Apr 29 Oct

-0.30 10 Mar

+0bp 0.50 17 Mar

-40 +0+0

-15bp -0.50 21 Apr

-0 -21 -0

0.50 16 Mar

+0bp

UK 0.3 Jan 22 Mar 4 Feb -12 +0+0

Sweden 0.8 Jan 15 Mar 11 Feb +4 +0+0

EZ 0.3 Jan 29 Feb 21 Jan +0bp

+14 +1

Australia 2.3 Jan 29 Feb 2 Feb -35 +0+0

US 1.4 Jan 16 Mar 27 Jan +0bp

9 Mar

+0bp 2.00 1 Mar

+0

Norway 3.0 Jan 10 Mar 24 Sep

Canada 2.0 Jan 18 Mar 20 Jan

-47 -1

Em

erg

ing

Ma

rke

ts

China 1.8 Jan 10 Mar

+0bp 0.75 5 Nov -25

G1

0

-50

+0 -18 +00.50

+50bp 3.75 18 Mar

1.50 11 Mar +0

14 Mar 2 Feb +0bp 6.75 5 Apr +0

Poland -0.7 Jan 29 Feb 3 Feb +0bp

Mexico 2.6 Jan 9 Mar 17 Feb

-25

Hungary 0.9 Jan 8 Mar 23 Feb +0bp -351.35 22 Mar +0 -28

India 5.7 Jan

+0

Indonesia 4.1 Jan 1 Mar 18 Feb -25bp -257.00 17 Mar +0 n.a.

Malaysia 3.5 Jan 23 Mar 21 Jan +0bp 3.25 9 Mar +0

S Africa 6.2 Jan 23 Mar 28 Jan +50bp +506.75 17 Mar +0 +124

Turkey 9.6 Jan 3 Mar 23 Feb +0bp

Russia 9.8 Jan 4 Mar 29 Jan +0bp

7.50 24 Mar +0 n.a.

n.a.11.00 18 Mar +0

Brazil 10.7 Jan 9 Mar 20 Jan +0bp 14.25 2 Mar +0

+66 +50

n.a.

-37

+45 -100

+250

-75

-2 +25

-4 -2 0 2 4 6 8

Fcast for 2016Current

-150 0 150 300

3


View from the Top

An Ever Closer Disunion

Rich Kelly

We continue to move through markets that disagree on what

the underlying problems are, what solutions are possible, and

even whether those solutions will make us better or worse off.

We are seeing simultaneous, but different, shocks work

through the system. Some, like Brexit, are self-inflicted. For

others, like Fed tightening/EM reserve selling or oil declines/

recession probabilities/weak credit markets, there’s active

debate as to how much of a vicious cycle there is between

them. Beneath it all, China’s previous ability to warehouse

volatility in manufacturing demand is gone at the same time as

their overall contribution to global manufacturing demand has

receded.

Meanwhile, all of these signals are clouded by the fact that

they must be transmitted through bank balance sheets that

remain in the middle of various regulatory regime changes. As

a result of those changes, bank balance sheets remain less

able to warehouse market risks. This increases daily volatility

and has certainly worsened market liquidity – which in part

was the point of these reforms to ensure the market is ware-

housing an appropriate amount of risk that it can properly

manage. This, however, complicates discerning the true sys-

temic risks and stresses from what is simply market indiges-

tion and the reduced ability to moderate market volatility.

So financial plumbing that responds poorly to asymmetric risks

and flows in a world of rising asymmetric risks and heavy one-

way flows is a risk to the outlook in and of itself. The big pic-

ture is that the Fed and other central banks forced global in-

vestors further out the risk curve more than most preferred to

be. Now, the giant sucking sound you hear may very well not

be a needed change in view but that process moving in re-

verse to rebalance. Rebalancing is good. Rebalancing is neces-

sary. But the closest we’ve ever come to exiting QE was

Japan’s attempt to unwind their current account expansion

through 2006, which actually did see weakening in EM carry

trades at the time, as well. So the biggest concerns in global

markets at the moment should not be the underlying funda-

mentals. Instead, it is how this adjustment is being forced

through a global economy and financial sector balance sheets

which are less dynamic than they have been.

What’s Helping Me Is Hurting You

We continue to see scope for the Fed to hike further in the

second half of the year. It will fall on others, however, like the

US

Ca

na

da

Au

str

alia

NZ

UK

EZ

No

rwa

y

Sw

ed

en

Ja

pa

n

Ch

ina

Ind

ia

Ind

on

esia

Ma

laysia

Bra

zil

Me

xic

o

Hu

ng

ary

Po

lan

d

Ru

ssia

S A

fric

a

Tu

rke

y

Oil |

IS

M

Fo

od

| S

PX

Feb

16 Jan

Dec

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

Feb

16 Jan

Dec

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

Feb

16 Jan

Dec

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

*For relative shading, monthly figure is compared with the last

three years worth of data for that country. For Production, the

two columns of drivers on the right show the US ISM

Manufacturing and S&P500. For Inflation, it shows oil and

food prices.

Pro

duction (

3m

%)

Headlin

e I

nflation (

y/y

%)

Core

Inflation (

y/y

%)

MACRO MOMENTUM HEAT MAP

G10 EM Driver

Dollar Bloc Europe Asia Latam EMEA

WEAK STRONG

1.2

1.4

1.6

1.8

2.0

2.2

2.4

08/13 02/14 08/14 02/15 08/15 02/16

GD

P F

ore

ca

st (%

)

Consensus

TD

* Weighted average of current and next yearSource: Consensus Economics, TD Economics

Year Ahead G7 GDP Forecasts

4


ECB to provide the shock absorbers to absorb some of the

risks that markets and economies are ill-equipped to absorb in

a world of low growth, no inflation, and limited balance

sheets. We have discussed our concerns that the stresses of

needed nominal adjustments may be getting overlooked.

Those focused on the typical pillars of sustainable growth –

healthy labour markets and resilient consumers – could be

caught blind-sided by the potential for a shock coming from

corporate and economic balance sheet mismatches abroad.

We are not operating in a world where there are pockets of

strength to offset weakness. We have a highly correlated,

broadly-shared slack remaining around the world. This leaves

no shock absorbers globally to volatility.

Energy price declines should simply be a large shift of cash

from energy producers to consumers. Those large declines in

profitability and cash flow for producers means bankruptcy

and restructuring is needed to clear out the market. Again, this

is necessary and good for a sustainable recovery. To the extent

there is collateral damage in that adjustment – supply chains

further downstream, uncorrelated debtors now forced to shift

larger shares of falling revenues to debt service, constraints

from the typical overshoot of credit tightening in EMs on the

back of capital outflows – we can see a drag that does not

originate with weakening household demand but can end up

there.

Energy producers’ balance sheets are stressed due to oil price

declines. Manufacturers’ balance sheets are stressed due to

Chinese growth declines. These adjustments continue to keep

the tide for global growth low. Is there a recession coming – or

even is it here already? It is possible, and the odds look to be

around one-third, but we see no clear signs that this is more

than a risk. Most importantly, we should remind people that

sometimes a recession is just a recession. Before the world of

subprime, markets knew of recessions without crises. That is

the most likely outcome if the recession camp proves correct,

with the most likely channel being adjustment in a low growth

and no inflation world forced through a less dynamic system.

What is a bit disconcerting on that front as we dig through the

tea leaves of global data is the recent trend building in some

of the forward-looking surveys. Through the second half of

2015, we saw US inventories adjust, which shaved about half a

percentage point off of growth in Q3 and Q4. Taken in isola-

tion, that is positive for 2016 as it puts some adjustment in the

rear-view mirror. For the most part, this was coming more in

isolation; however, by November, the Chinese Manufacturing

PMI began to show falling inventories with declines acceler-

ating through January, even as the headline index remained

stable.

In and of itself, this would not be all that surprising given what

we know of China, and again, it appeared more isolated. But

we have now seen some of the inventory deleveraging show

up within other Asian EMs, as well the German IFO, where the

latter posted a sizeable decline in expectations in February,

which tends to be followed by further weakening in growth

momentum and the inventory cycle. With weather disruptions

and VW issues around year-end, these signs are muddled, but

if we see weakness in the survey for another month, and hard

data reported through March corroborates what the survey

has been flagging, the German economy may be at risk of con-

tracting somewhere in the first half of 2016.

It’s also possible this destocking is the result of some surprise

demand that has not yet shown up in the data, which would

be positive, but we simply haven’t seen any evidence of this.

This instead looks like inventories falling as producers adjust

to lower expectations of demand going ahead. We have sug-

0.00

0.05

0.10

0.15

0.20

0.25

0.30

<40% 40-45 45-50 50-55 55-60 60-65 65-70 >70%

*Implied probabilities embedded in betting markets, adjusted for overround in raw odds; Source: Betfair, TD Securities

Implied probability of UK popular vote result on remaining in the EU* (%)

Betting Odds Increased to 70% Likelihood of No Brexit With Strong Upward Bias to Popular Vote Result

Market pricing 70% chance that the UK vote to remain in the EU ends up 50% or higher

-3

-2

-1

0

1

2

3

4

-3

-2

-1

0

1

2

3

4

05 06 07 08 09 10 11 12 13 14 15 16

Chinese Inventories

German Inventories

*PMI and IFO index on stock of finished goods normalized; Source: Haver, TD Securities

Index*

Are China and Germany Pre-emptively Destocking Due to Weakening Demand or is Manufacturing Turning a

Corner?

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gested about a one-third chance of recession risks in the US

and while German and Eurozone risks looked much lower,

those risks are now rising, as well. It is still not enough to sug-

gest this isn’t just adjustment happening in a low potential

growth world, but it is enough to be concerning.

Please Sir, Could I Have Some More?

If this were a normal environment, central banks would be

cutting interest rates, incentivizing savers to spend and bor-

rowers to leverage up, pulling some demand strength forward.

But this is not a normal world. QE is a poor tool for tinkering

with monetary policy and there are diametrically opposing

views on whether negative rates are the new panacea or a

horseman of the apocalypse. We have replaced Y2K fears for Y

-2% fears. We believe negative rates broadly across the world

have more scope to help the recovery, even if that help is less

intensive than easing rates when they are in positive territory,

and even if we must accept that this adjustment is constrained

by the structure of markets and sluggish preparations of gov-

ernments, regulators, and banks to prepare balance sheets for

implementing this tool.

Rather than blanket fear, it’s useful to think through potential

implications of negative rates in the context of a stylized bal-

ance sheet. From a net interest margin perspective, one prob-

lem banks have run into is that the interest rate they pay on

deposits is no longer passing along rate cuts, while the interest

rate they earn on loans and liquid assets continue to fall. The

frictions which are preventing bank funding costs to decline

with the same beta to changes in the policy rate are compress-

ing NIM and reducing profitability. The answer to that is not to

stop cutting policy rates, but to ensure the ability to pass along

negative rates in those countries that need it. At first blush,

there is no direct difference to NIM when a bank borrows at

1% and lends at 3% than when a bank borrows at -3% and

lends at -1%, until we account for what could happen to bank

assets and household and corporate borrowing trends.

So what happens if those frictions are cleared in the thought

experiment of moving to a fully negative interest rate world?

For a bank that is taxing deposits, that is now income on the

income statement, which as with all other income, finds its

way back into shareholder equity if it makes it to retained

earnings. So banks’ liabilities structure shifts over time with

the pace of declines in deposits equal to the negative rate,

seeing rising equity capital when costs are low enough to en-

sure profitability. So far here, there is no necessary change to

the size of bank balance sheets. That would seem to come,

however, from the increased incentives for individuals and

corporates to reduce their deposits to as close to zero as they

can get and pay down their debts early when lending is being

down at positive interest rates, so a 1:1 decline in banks’ bal-

ance sheets on both the asset and liabilities side. Then, once

lending rates fall into negative territory, the pressure on bank

balance sheets is more indirect. It is that case where deposi-

tors would be better off taking out deposits and simply spend-

ing the money – why pay down a mortgage early when the

bank is paying you to buy a car? So that is the situation where

the bank must either find a new place to borrow funding or

else deleverage.

That shift of cash on the balance sheet and potentially higher

reliance on wholesale funding shows that it is the liquidity

coverage and net stable funding ratios that start to serve as

the binding constraints to bank activities and banks would

potentially have greater risks of being captive to market and

funding liquidity freezes. And perhaps we are already seeing

2/07 2/08 2/09 2/10 2/11 2/12 2/13 2/14 2/15 2/16

0

100

200

300

400

500

600

European Credit Deterioration Has Fed Into Deteriorating Liquidity

Eur Sub Finl

Eur Snr Finl

Eur IG Corp

Source: Bloomberg

Spread (bps)

-6

-4

-2

0

2

4

6

8

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

10/12 6/13 2/14 10/14 6/15 2/16

Relative data surprises (lhs)

DXY

*TD Securities standardized index of surprises relative to consensus; Source: TD Securities, Bloomberg

Index* M/M %

Is Dollar Weakness Playing With Fire In The Face Of Relatively Stronger US Data?

6


that systemic increase in volatility that a low interest rate envi-

ronment creates. European banks in general remain in a weak-

er position than global peers as balance sheets are still in re-

pair. To help with that process, we saw use of such capital as

contingent convertible bonds (cocos) to fill in capital needs.

These are bonds in good times but convert to equity once

banks Tier 1 capital falls sufficiently.

These instruments are untested, and unfortunately their first

test showed that as we build recessionary risks, they become

extremely illiquid. Who wants to buy a bond with an embed-

ded option with large uncertainties as to whether that option

is about to be exercised or not? Perhaps in a world where risk

can be warehoused like it once was, there are returns to be

had – there is frequently profit to provide liquidity in a liquidi-

ty crisis. But with that ability lessened in private markets, we

must continue to be ready for higher volatility and central

banks must be prepared for providing liquidity support at the

very least more readily.

In European stresses in February, we have seen ongoing dete-

rioration in market liquidity – the ability to deal in size. This

has been exacerbated by sharply higher pricing of credit risks

across financials – which seems exacerbated by the lack of

liquidity in markets themselves, with early stages of all of this

into deteriorating funding liquidity – the ability off otherwise

solvent organizations to fund themselves in the market. Po-

tential global growth is already low. We cannot afford to re-

duce it even further through unnecessary volatility which can

feed back into tighter financial conditions for borrowers and

find its way back into the real economy.

The Mind is Willing, But the Flesh is Weak

The global economy is better than markets fear right now, but

weaker than US fundamentals in isolation might look. We

should be in a needed period of rebalancing global liquidity

and risk asset pricing and right-sizing expectations. ECB action

to ease further and provide liquidity support should be

enough to placate credit and liquidity tensions. Fiscal stimulus

coming in Canada and Norway should be enough to reduce

significant downside risks in some commodity economies ad-

justing – and in a perfect world would be copied by many oth-

er policymakers globally.

From a longer-term basis, long-end yields are too low but are

likely going lower for now, especially for the high yielders like

Aussie, Kiwi, and US Treasuries, while we should see breake-

vens rise steadily once recessionary probabilities fade. Riskier

assets, like EM, and some risk-sensitive G10 crosses remain

selectively attractive for longer horizons for those that can

begin to stomach that exposure but remain in the heart of the

QE-reversal repricing of risk assets at the moment and we will

continue to look more for short-term balance sheet and flow

driven trades for opportunities until some clear structural op-

portunities return.

-50

-25

0

25

50

75-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

7/14 10/14 1/15 4/15 7/15 10/15 1/16

EM-Advanced Data Surprises*

Change in 5y spreads (rhs, inv)

*TD Securities standardized index of surprises relative to consensus; Source: TD Securities, Bloomberg

Index* 5y spread (4w change, inverted)

EM Data Surprises Actually Outperforming Developed Markets During Global Growth Fears

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Snapshot: US

TD FORECASTS - United States Spread to Germany

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

O/N 0.50 0.50 0.75 0.75 1.00 1.00 1.25 1.25 80 100 125 125 150 150

3m 0.33 0.30 0.55 0.55 0.80 0.80 1.05 1.05 94 95 115 115 140 140

2y 0.73 0.70 0.90 1.00 1.25 1.30 1.45 1.50 126 135 145 145 160 155

5y 1.18 1.20 1.40 1.50 1.75 1.80 2.00 2.05 152 165 150 140 160 150

10y 1.73 1.80 2.00 2.05 2.30 2.30 2.40 2.45 157 185 170 145 160 145

30y 2.60 2.60 2.80 2.85 3.05 3.05 3.10 3.15 176 185 170 165 165 155

USD/JPY 113 110 113 116 118 121 121 122

EUR/USD 1.10 1.10 1.07 1.10 1.08 1.12 1.10 1.14

GBP/USD 1.40 1.36 1.37 1.45 1.50 1.53 1.55 1.56

USD/CHF 0.99 0.99 1.03 0.99 1.00 0.95 0.98 0.96

[email protected] +1 212 827 7186






After stumbling at the end of last year, with growth

printing 0.5% q/q, the US economic recovery appears to

have regained its footing. Despite the recent

intensification of global headwinds, domestic growth

momentum appears to have rebounded & expected to post

a respectable 2.0% or better pace of growth in Q1.

However, with the risks to the outlook tilting to the

downside, 2016 growth performance is l ikely to be subpar.

Despite recent stabilization, concerns over sluggish global

growth and the spillover of recent market volatil ity to the

real economy persist, raising questions about the

sustainability of US outperformance. Markets have

aggressively pushed out rate hike pricing, and are likely

underpricing the odds of further 2016 hikes. We look to be

positioned short front end Treasuries and long 10yr TIPS

BEs.

The USD remains firm but much of its support flows from

more compelling weakness elsewhere. We think the USD

will lag the JPY but outperform the EUR and GBP as

idiosyncratic factors weigh. With US growth sluggish and

the Fed a hesitant hiker, we remain reluctant to embrace

USD strength on a broad basis as we continue to expect the

dollar's bull run to peak this year.

MACRO

RATES

FX

8


TD FORECASTS - Canada Spread to US

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

O/N 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0 0 -25 -25 -50 -50

3m 0.47 0.45 0.45 0.45 0.45 0.45 0.45 0.45 14 15 -10 -10 -35 -35

2y 0.50 0.40 0.45 0.55 0.65 0.75 0.85 0.95 -23 -30 -45 -45 -60 -55

5y 0.65 0.60 0.70 0.85 1.05 1.25 1.40 1.55 -53 -60 -70 -65 -70 -55

10y 1.15 1.20 1.35 1.45 1.70 1.80 2.00 2.10 -58 -60 -65 -60 -60 -50

30y 1.95 1.95 2.10 2.20 2.35 2.40 2.50 2.60 -65 -65 -70 -65 -70 -65

USD/CAD 1.36 1.43 1.43 1.38 1.36 1.34 1.33 1.32

CAD/JPY 83 77 79 84 87 90 91 92

EUR/CAD 1.50 1.57 1.53 1.52 1.47 1.50 1.46 1.50

GBP/CAD 1.90 1.94 1.96 2.00 2.04 2.06 2.06 2.06

Snapshot: Canada






Activity data through December was better than feared and

is consistent with a flat print for Q4 real GDP growth and a

respectable handoff to Q1. Non-energy exports have also

resumed their recovery amid a weaker CAD. Economic

backdrop is broadly in line with the Bank of Canada's

expectation which will keep the overnight rate unchanged

ahead of the announcement of fiscal stimulus later in

March.

Yields in the front-end of the curve will have a hard time

increasing much further as long as oil prices are

depressed. Canada-US spreads are near the top of recent

ranges, partly reflecting pessimistic pricing for the Fed.

We look for Canadian bonds to outperform versus the US

in a rising rate environment, with Canada 2s10s bear

steepening. Fiscal worries will keep 10s30s elevated

relative to levels that prevailed in recent years.

A period of inertia is likely ahead for USDCAD, at least

until the Federal Budget on March 22. Persistent CAD

weakness remains but material upside/downside is

inherently self-defeating owing to ERPT to inflation and

growth rebalancing towards non-energy sectors. Another

move well above 1.40 along with stabilization in oil,

reduced BoC cut prospects, may be cause for strategic shift

in view.

MACRO

RATES

FX

0.2

0.3

0.4

0.5

0.6

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

Oct-15 Nov-15 Dec-15 Feb-16

Source: Bloomberg, TD Securities

Moving Beyond Peak Pessimism Should Anchor Bank of Canada

TD Surprise Tracker (LHS, Index)

1 Year OIS (RHS, lagged 3 weeks, bps)

9


TD FORECASTS - Australia Spread to US

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

O/N 2.00 2.00 2.00 2.00 2.00 2.25 2.50 2.75 150 150 125 125 100 125

3m 2.01 2.25 2.25 2.25 2.30 2.50 2.70 2.95 168 195 170 170 150 170

3y 1.74 1.80 1.90 2.00 2.25 2.50 2.65 2.80 101 110 100 100 100 120

5y 1.92 2.00 2.10 2.20 2.45 2.70 2.80 3.10 74 80 70 70 70 90

10y 2.40 2.40 2.50 2.55 2.80 3.00 3.10 3.30 67 60 50 50 50 70

AUD/USD 0.72 0.68 0.68 0.69 0.70 0.71 0.74 0.76

AUD/NZD 1.08 1.08 1.10 1.13 1.17 1.18 1.21 1.23

AUD/JPY 81 75 77 80 83 86 90 93

EUR/AUD 1.53 1.62 1.57 1.59 1.54 1.58 1.49 1.50

Snapshot: Australia

[email protected] +65 6500 8047




Housing-related activity remains solid (finance, credit,

house prices) as is employment growth, while consumer

and business sentiment has sagged due to global volatil ity

(rather than domestic issues). Exports to China remain

strong, key commodity prices have stabilised. GDP

remains sub-trend at 2½% for 2016, with mining shrinking

and services expanding.

The RBA is keeping a very cool head, ignoring most of the

volatil ity. For now the Bank believes there is little new

data to trigger a reasessment of the global outlook. The

market has lowered the probability of a H1 cut, but is fully

priced for an Aug cut. We lowered our bond forecasts to

reflect US forecast changes and the impact of NIRP. AU

10yrs capped at 2.75%.

The AUD is hovering near the highs for this year thanks to

the market trimming Fed rate hike forecasts. The RBA does

not appear to be concerned with the AUD rise, stating it

has adjusted to commodity prices. We target $US0.69 by

year-end, with balanced risks. China risks and low

commodity prices weigh on the currency, but attractive

yields and RBA refusal to cut provide a floor.

MACRO

RATES

FX

0%

20%

40%

60%

80%

100%

120%

140%

160%

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Probability of a 25bps RBA cut

Source: TD Securities, Bloomberg

120

130

140

150

160

170

180

190

200

210

220

230

240

Sep-97 Sep-00 Sep-03 Sep-06 Sep-09 Sep-12 Sep-15

Australia: annual consents reach a record high

Annual consents'k

long-run average is 165k

Source: Haver; TD Securities

10


TD FORECASTS - New Zealand Spread to Australia

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

O/N 2.50 2.50 2.50 2.50 2.50 2.75 3.00 3.25 50 50 50 50 50 50

3m 2.58 2.75 2.75 2.75 2.80 2.95 3.20 3.45 57 50 50 50 50 45

2y 2.25 2.45 2.45 2.50 2.60 2.90 3.15 3.40 51 65 55 50 35 40

3y 2.32 2.55 2.65 2.75 2.85 3.05 3.25 3.45 40 55 55 55 40 35

10y 2.65 3.10 3.15 3.25 3.35 3.45 3.65 3.80 25 70 65 70 55 45

NZD/USD 0.67 0.63 0.62 0.61 0.60 0.60 0.61 0.62

AUD/NZD 1.08 1.08 1.10 1.13 1.17 1.18 1.21 1.23

NZD/JPY 75 69 70 71 71 73 74 76

EUR/NZD 1.65 1.75 1.73 1.80 1.80 1.87 1.80 1.84

Snapshot: New Zealand





GDP remains solid at 2½%, inflation a non-issue. Domestic

activity is firm, PMI/PSIs are expanding and housing

outside of Auckland is thriving. That said, dairy prices are

struggling and the recovery in the NZD in the last month

are not welcome developments. As energy imports are

significant, the terms of trade are not falling as rapidly as

first throught.

TD expects the 2.5% cash rate to extend into end-2016,

although the risks lie towards further easing even though

the Bank's preferred inflation measure appears to have

changed. We have shaved our NZGB forecasts to reflect

this risk, NIRP and lower UST forecasts. OIS is priced for -

25bp in July, but the RBNZ will need an external trigger to

act.

We have pushed back our NZD underperformance, as the

RBNZ has high hurdles for easing, and the terms of trade

are stronger than expected given weak energy input costs.

Our AUDNZD year-end target has been lowered from 1.25

to 1.13, via the NZD only gently depreciating towards

$US0.61 by year end.

MACRO

RATES

FX

1750

2250

2750

3250

3750

4250

4750

5250

0.60

0.65

0.70

0.75

0.80

0.85

Feb-10 Feb-12 Feb-14 Feb-16

NZD fall in line with dairy prices

NZD

USDNZD

Fonterra in USD

Source: Fonterra; Bloomberg, TD Securities

0

1

2

3

4

5

Dec-03 Dec-06 Dec-09 Dec-12 Dec-15

RBNZ 'sectoral factor model' --> no hikes/cut would have occurred

Conventional CPI

RBNZ sectoral factor model

%/yr

Source: StatsNZ, RBNZ, TD Securities

11


TD FORECASTS - German Rates and Euro Spread to US

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

O/N -0.30 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 -80 -100 -125 -125 -150 -150

3m -0.62 -0.65 -0.60 -0.60 -0.60 -0.60 -0.60 -0.50 -94 -95 -115 -115 -140 -140

2y -0.53 -0.65 -0.55 -0.45 -0.35 -0.25 -0.15 -0.10 -126 -135 -145 -145 -160 -155

5y -0.34 -0.45 -0.10 0.10 0.15 0.30 0.40 0.70 -152 -165 -150 -140 -160 -150

10y 0.16 -0.05 0.30 0.60 0.70 0.85 1.05 1.20 -157 -185 -170 -145 -160 -145

30y 0.84 0.75 1.10 1.20 1.40 1.50 1.70 2.10 -176 -185 -170 -165 -165 -155

EUR/USD 1.10 1.10 1.07 1.10 1.08 1.12 1.10 1.14

EUR/GBP 0.79 0.81 0.78 0.76 0.72 0.73 0.71 0.73

EUR/CHF 1.09 1.09 1.10 1.09 1.08 1.06 1.08 1.10

EUR/JPY 124 121 121 128 127 136 133 139

Snapshot: Eurozone

The euro area continues to do reasonably well on the

growth front as slack is worked off. One outlier is German

industrial production which has disappointed

significantly, due to weak auto production and stagnant

export demand. Unemployment continues to decline

steadily. But inflation remains very low, and we expect the

ECB to ease broadly in March as they revise down their

projections.

The front end is currently priced for around 13bps of cuts

from the ECB in March, and another 12bps priced for the

rest of the year. Periphery spreads remain very wide

suggesting the market may not be expecting much on the

QE front. We favour bund curve flattening and periphery

spread tightening going into the ECB meeting. Continue to

hold ERZ6/ERZ7 flattener.

Our expectations for an aggressive ECB easing package in

March keep the focus on downside risks for EUR. Slowing

growth in core economies add to these pressures although

the region's substantial external surplus remains a

notable offset.

MACRO

RATES

FX

96

97

98

99

100

101

102

103

104

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

German IP Is Slowing vs Rest of Euro Area

Germany

Euro area ex-Germany

Source: TD Securities / Haver

Index



James [email protected] +44 20 7786 8422




12


TD FORECASTS - United Kingdom Spread to US

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

O/N 0.50 0.50 0.50 0.50 0.75 0.75 1.00 1.00 0 0 -25 -25 -25 -25

3m 0.47 0.50 0.50 0.60 0.90 1.05 1.15 1.25 15 20 -5 5 10 25

2y 0.34 0.35 0.55 0.75 1.05 1.15 1.35 1.40 -39 -35 -35 -25 -20 -15

5y 0.72 0.80 1.00 1.30 1.50 1.90 2.05 2.10 -46 -40 -40 -20 -25 10

10y 1.40 1.45 1.70 1.95 2.10 2.20 2.40 2.45 -33 -35 -30 -10 -20 -10

30y 2.37 2.30 2.40 2.60 2.80 2.95 3.15 3.25 -24 -30 -40 -25 -25 -10

GBP/USD 1.40 1.36 1.37 1.45 1.50 1.53 1.55 1.56

EUR/GBP 0.79 0.81 0.78 0.76 0.72 0.73 0.71 0.73

GBP/CHF 1.39 1.35 1.41 1.43 1.50 1.45 1.52 1.51

GBP/JPY 157 149 155 168 177 186 187 191

Snapshot: United Kingdom

Real activity continues to trundle along at a fairly neutral

speed, but this masks divergence between the

manufacturing sector (in recession) and the services

sector (decent growth). Brexit fears might weigh on

business confidence but won’t affect macro much. Weak

productivity and labour market tightness should start to

put renewed pressure on wage growth through 2016,

setting the BoE up for a first hike in November 2016.

Rates markets continue to price in the first BoE hike over

2y from now, currently priced in for mid 2018. Some

easing is priced into the OIS curve, reflecting a 1/3 chance

of Brexit materialising. We expect Brexit fears to continue

to play out on the futures strip and see good risk/reward

in owning the Sept 2016 short sterling contract as a hedge

against Brexit materialising. Continue to hold an outright

2y short gilt position.

We expect the GBP to remain on the defensive as the UK

economy has cooled and the BoE has kicked rate hike

expectations into the long grass. Brexit concerns have

come to the fore, amplifying sterling's headwinds in the

weeks ahead.

MACRO

RATES

FX



James [email protected] +44 20 7786 8422




13


TD FORECASTS - Norwegian Rates and Scandie FX Spread to US

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

O/N 0.75 0.50 0.25 0.25 0.25 0.25 0.25 0.25 25 0 -50 -50 -75 -75

3m 0.61 0.45 0.20 0.20 0.20 0.20 0.20 0.20 28 15 -35 -35 -60 -60

1y 0.51 0.60 0.50 0.65 0.75 0.85 1.05 1.15 -22 -10 -40 -35 -50 -45

3y 0.54 0.75 0.60 0.85 1.05 1.20 1.50 1.70 -64 -45 -80 -65 -70 -60

8y 1.17 1.40 1.30 1.45 1.60 1.80 1.90 2.00 -56 -40 -70 -60 -70 -50

EUR/NOK 9.53 9.50 9.50 9.45 9.35 9.25 9.15 9.15

USD/NOK 8.66 8.64 8.88 8.59 8.66 8.26 8.32 8.03

NOK/SEK 0.98 0.96 0.96 0.95 0.96 0.96 0.97 0.96

EUR/SEK 9.38 9.15 9.10 9.00 8.95 8.90 8.85 8.80

USD/SEK 8.53 8.32 8.50 8.18 8.29 7.95 8.05 7.72

Snapshot: Scandies

The Riksbank is likely done easing for now, but they have a

tendency to surprise. However a two-out-of-six dissent at

Feb’s cut meeting suggests a high hurdle for further policy

action. We expect the Norges Bank to continue easing into

16H1, with a cut anticipated at their March meeting and

again in Q2. While their fiscal buffer is helping soften

some of the blow from lower oil prices, monetary policy

can do more to help.

Norges easing & the ongoing rally in bunds should leave

NGBs rallying&retracing more of their Feb losses. So far,

the correl with oil is what has driven the relative FI

weakness, but as in recent yrs, we have seen correl break

down in times of ECB action so even if oil is supported

somewhat on stronger CB action, we expect the tether to

EGB rates to dominate over the next month as relative

carry and duration in the mkt readjusts.

The Riksbank continues to rail against SEK strength, but

the robust Swedish economy argues for a stronger

currency. We continue to expect a gradual but firm

appreciation trend. The NOK has benefitted from more

stable oil prices, but with the Norges Bank stil l in easing

mode, prospects for a meaningful recovery are muted. We

continue to favour NOKSEK downside.

MACRO

RATES

FX

-1%

0%

1%

2%

3%

4%

5%

6%

2011 2012 2013 2014 2015

Norway Growth is Decelerating Sharply

Mainland Norway

Sweden

Source: TD Securities / Haver

y/y






0.94

0.96

0.98

1.00

1.02

1.04

1.06

1.08

1.10

1.12

Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16

NOKSEK: Spot vs TD Fair Value Model

NOKSEK "Fair Value"

NOKSEK Spot

Sources: Bloomberg, TD Securities

14


TD FORECASTS - Japan

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

USD/JPY 113 110 113 116 118 121 121 122

EUR/JPY 124 121 121 128 127 136 133 139

AUD/JPY 81 75 77 80 83 86 90 93

GBP/JPY 157 149 155 168 177 186 187 191

Snapshot: CHF

In addition to drawing solid support from its external

surplus, CHF may have rediscovered some of its safe haven

appeal as Brexit concerns have reignited regional pressures.

We think prospects for sustanied CHF strength are limited,

however, as the SNB will act to limit further appreciation.

FX



TD FORECASTS - Switzerland

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

EUR/CHF 1.09 1.09 1.10 1.09 1.08 1.06 1.08 1.10

USD/CHF 0.99 0.99 1.03 0.99 1.00 0.95 0.98 0.96

CHF/JPY 114 111 110 117 118 128 123 126

GBP/CHF 1.39 1.35 1.41 1.43 1.50 1.45 1.52 1.51

Snapshot: JPY

The JPY continues to rally despite the BoJ's efforts to the

contrary. This points to a broader problem of policy fatigue

in FX markets as easing measures become exhausted. The

JPY's underlying fundamentals remain constructive while

fragile risk appetite also adds to the yen's bullish tone.

FX



15


Snapshot: EMEA

TD FORECASTS - EMEA Policy Rates and FX Spread to Germany

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

Poland 1.50 1.50 1.00 1.00 1.00 1.00 1.25 1.25 180 200 150 150 150 150

Hungary 1.35 1.35 1.00 1.00 1.00 1.00 1.25 1.25 165 185 150 150 150 150

Russia 11.00 11.00 10.75 10.50 10.25 10.25 10.25 9.75 1130 1150 1125 1100 1075 1075

Turkey 7.50 7.50 7.00 10.00 10.00 10.00 10.00 10.50 780 800 750 1050 1050 1050

S. Africa 6.75 6.75 7.00 7.25 7.25 7.25 7.25 7.25 705 725 750 775 775 775

EUR/PLN 4.36 4.49 4.55 4.60 4.72 4.70 4.67 4.65

EUR/HUF 311 310 308 305 303 302 300 298

EUR/RUB 83.5 87.3 83.6 79.2 72.9 75.0 71.9 74.1

EUR/TRY 3.22 3.41 3.46 3.63 3.67 3.92 3.85 3.99

EUR/ZAR 17.11 18.26 18.35 20.24 19.93 20.38 19.42 19.84




Poland and Hungary exhibit good growth, but Polish

government policies could trigger further downgrades.

Russia remains an oil story with some political risks; the

economy is likely to shrink again this year. S. Africa’s

economy is stil l ail ing, and risk of downgrade to junk.

Turkey’s growth will remain respectable, but inflation is a

problem and political risks are high. Confused CBRT policy

runs risk of serious missteps.

With the ECB likely to ease in March, rate cuts in Poland

and Hungary are increasingly likely this year, particularly

in Poland. In Turkey, we stil l see the CBRT having to hike in

response to TRY weakness and rising inflation, although

the timing is uncertain. S. Africa will tighten a bit further,

but weak economy means the end of cycle is near. RUB

weakness should keep CBR on hold for a while, with easing

resuming later this year.

EURHUF should trend down on the back of ECB easing and

likely Hungary upgrade later this year. Political risks to

cause PLN to underperform, and we expect some further

weakness against HUF. TRY exposed to geopolitical risks

and CBRT policy confusion; we expect further weakness.

Stagnant economy and downgrade risk likely to cause ZAR

to weaken. Our bullish oil forecast suggests that RUB

should strengthen this year.

MACRO

RATES

FX

35

45

55

65

75

85

95

105

Jan-2014 Jul-2014 Jan-2015 Jul-2015 Jan-2016

Ja

n 2

01

4=

10

0

FX Indices - EM Global vs EMEA

TD EMFX Index

PLN

HUF

RUB

TRY

ZAR

Depreciation vs USD

Appreciation vs USD


0.0

2.0

4.0

6.0

8.0

10.0

12.0

0Y 2Y 4Y 6Y 8Y 10Y 12Y 14Y

%

Term structure of major EMEA swap rates

IRS (PLN)

IRS (HUF)

Xccy (RUB)

Xccy (TRY)

IRS (ZAR)


16


TD FORECASTS - Latam Policy Rates and FX Spread to US

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

Brazil 14.25 14.25 14.25 14.25 13.75 12.75 11.75 11.25 1375 1375 1350 1350 1275 1175

Mexico 3.75 3.75 4.00 4.00 4.25 4.25 4.50 4.50 325 325 325 325 325 325

USD/BRL 3.93 4.20 4.35 4.40 4.35 4.30 4.25 4.20

USD/MXN 18.10 18.80 19.15 19.05 18.50 18.20 18.00 17.75

BRL/MXN 4.61 4.48 4.40 4.33 4.25 4.23 4.24 4.23

EUR/BRL 4.32 4.62 4.65 4.84 4.70 4.82 4.68 4.79

EUR/MXN 19.92 20.68 20.49 20.96 19.98 20.38 19.80 20.24

Snapshot: LATAM




Brazil remains dominated by the need for a fiscal

adjustment, made more difficult by stil l deeply contracting

growth and the on-going impeachment process. Macro

assets like bonds and FX are somewhat insulated by high

yields, but fundamentals are far from turning positive.

Mexico’s currency volatil ity will dominate the central

bank’s posture, which has subjugated economic

considerations to an attempt to insulate the currency.

Banxico’s forceful rates-based effort to stabilize MXN led

to curve flattening, but a bias for further tightening

remains. Given Banxico is unlikely to be successful with

rates alone, further tightening is likely. Failure to hike in

January against stil l unfavourable inflation dynamics

implies the BCB will remain on hold until beginning of an

easing cycle in Q4, contingent upon requisite positive

fiscal and political outcomes.

BRL will continue to suffer from a slow burn leading

USDBRL to 4.40 by Q3, yet the hefty carry should make

shorts profitable over a 12m horizon, and support spot

after the impeachment is cleared. MXN looks to offer solid

value but requires a bottom in oil and an easing in EM

volatil ity that MXN has borne the brunt of; we see peak

MXN weakness in Q2 at 19.15.

MACRO

RATES

FX

50

60

70

80

90

100

110

Jan-2014 Jul-2014 Jan-2015 Jul-2015 Jan-2016Ja

n 2

01

4=

10

0

FX Indices - EM Global vs Latin America

TD EMFX Index

BRL

MXN

CLP

COP

PEN

Depreciation vs USD

Appreciation vs USD


13.00

13.50

14.00

14.50

15.00

%

BCB Implied Rate Expectations

TD forecast DI Futures

0

50

100

150

200

1M 2M 3M 4M 5M 6M 7M 8M 9M 10M 11M 12M

bp

Market minus TD Fcast (bp)


17


Snapshot: EM ASIA

TD FORECASTS - Asian Policy Rates and FX Spread to US

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17 6/17 9/17

100d

history

Spot+4q

fcast Spot 3/16 6/16 9/16 12/16 3/17

India 6.75 6.75 6.50 6.50 6.50 6.50 6.25 6.25 625 625 575 575 550 550

Indonesia 7.00 7.00 7.00 6.75 6.75 6.75 6.75 6.75 650 650 625 600 575 575

Malaysia 3.25 3.25 3.25 3.25 3.50 3.50 3.75 3.75 275 275 250 250 250 250

USD/CNY 6.53 6.60 6.70 6.80 6.95 7.07 7.14 7.20

USD/INR 68.7 68.3 69.7 71.0 70.8 70.6 70.4 70.2

USD/IDR 13413 13950 14250 14200 14100 14090 14080 14050

USD/MYR 4.22 4.22 4.30 4.38 4.33 4.30 4.28 4.27




China remains challenged in addressing macro

imbalances and financial sector risks, both of which

remain a drag on growth. Demand for Asian exports

continues to look weak, suggesting further monetary

support for the region’s economies, and/or weaker

exchange rate levels depending on the room to ease,

however disorderly CNY depreciation constitutes a

regional financial shock risk. India and Indonesia remain

growth bright spots.

An easing bias remains, though domestic constraints may

mean exchange rates do more of the heavy lifting. China

would likely have eased further by now if not for concern

over the currency; we stil l expect further monetary efforts,

while fiscal policy remain accommodative. India should

cut after the February budget, while Indonesia cut earlier

than we expected and remains open to more. Malaysia will

look to raise rates in Q4.

Capital outflow will keep depreciatory pressure on CNY,

which will challenge the NE Asia currency complex and

remain the key external risk to Asian FX. We expect

controlled depreciation however, as a one-off large

devaluation is unlikely. IDR in particular, and to some

degree INR, will be safer havens thanks to high yield

insulation, but spot may stil l suffer, while MYR may find

greater value should oil prices bottom out.

MACRO

RATES

FX

70

75

80

85

90

95

100

105

110

Jan-2014 Jul-2014 Jan-2015 Jul-2015 Jan-2016

Ja

n 2

01

4=

10

0

FX Indices - EM Global vs Asia

TD EMFX Index

CNY

INR

IDR

MYR

PHP

SGD

Depreciation vs USD

Appreciation vs USD


6.00

6.50

7.00

7.50

8.00

8.50

%

RBI Implied Rate Expectations

TD forecast Onshore OIS FX Fwd

0

20

40

60

80

100

1M 2M 3M 4M 5M 6M 7M 8M 9M 10M 11M 12M

bp

Market minus TD Fcast (bp)


18


Analytics at a Glance

19



G10 FX AT A GLANCETech 1-Month Correlation Mkt Positioning History and Forecasts

100d history

Bias

VIX SPX WTI US10 DXY CRB

US

data

Largest

3mΔ Δm Δy Δytd Mkt TD

DXY Neutral -0.6 0.5 0.2 0.1 … 0.0 -0.1US data

-0.4-2 4 -1 -1 -3

USD/JPY Neutral -0.8 0.7 0.6 0.8 0.3 -0.3 0.3WTI

+0.6-5 -5 -6 7 5

USD/CHF Bullish -0.6 0.4 0.3 0.3 0.8 -0.1 -0.1WTI

+0.4-2 5 -1 5 1

EUR/SEK Neutral 0.4 -0.4 -0.4 -0.6 0.0 0.2 -0.3US10

-0.51 -1 2 -3 -5

EUR/NOK Neutral 0.6 -0.6 -0.7 -0.5 -0.4 0.2 -0.2US10

-0.50 11 -1 -4 -2

GBP/USD Bearish -0.3 0.5 0.4 0.3 0.0 -0.3 0.0SPX

+0.7-2 -10 -5 6 7

EUR/USD Bearish 0.6 -0.5 -0.3 -0.3 -0.9 0.2 0.1US data

+0.41 -3 1 -2 -2

USD/CAD Neutral 0.5 -0.6 -0.7 -0.5 -0.1 0.1 0.0DXY

-0.4-5 10 -2 0 0

NZD/USD Neutral -0.3 0.3 0.2 0.3 -0.1 -0.3 -0.4US10

+0.44 -12 -2 -6 -10

AUD/USD Neutral -0.7 0.7 0.5 0.6 0.1 -0.2 0.0US10

+0.64 -9 -1 -3 -350

50

50

50

50

50

50

50

50

50

100

100

100

100

100

100

100

100

100

100

200

200

200

200

200

200

200

200

200

200

-12 -9 -6 -3 0 3 6 9 12

Strong support/resistance

50/100/200 day moving average

-3 -2 -1 0 1 2 3 -20 -10 0 10

% from spot

3m z-score

Forecasted %∆ from spot

Short Long

Sorted by average G10 correlation

Strongest Weakest

(1m - 3m) correlation

Fcast ∆ to Q416 (%)

IMM Risk Reversals

Rate differential

EMFX AT A GLANCETech 1-Month Correlation Mkt Positioning History and Forecasts

100d history

Bias

WTI VIX SPX US10 DXY

US

data CRB

Largest

3mΔ Δm Δy Δytd Mkt TD

USD/TRY Bullish -0.6 0.4 -0.4 -0.3 0.2 0.0 0.1WTI

-0.5-3 18 0 5 16

USD/ZAR Neutral -0.6 0.3 -0.4 -0.1 -0.1 0.1 -0.2WTI

-0.3-6 36 1 7 19

USD/RUB Neutral -0.8 0.4 -0.5 -0.4 -0.2 -0.3 0.1US data

-0.3-5 24 5 -5 -14

USD/HUF Bearish 0.0 -0.2 0.0 0.2 0.6 0.1 0.0SPX

-0.3-2 5 -3 3 0

USD/PLN Neutral -0.3 0.0 -0.1 -0.3 0.5 -0.3 0.2US data

-0.7-4 8 1 2 11

USD/BRL Bullish -0.4 0.5 -0.5 0.0 -0.2 -0.2 0.0DXY

-0.4-4 37 -1 9 10

USD/MXN Neutral -0.7 0.7 -0.7 -0.4 -0.5 -0.2 0.2DXY

-0.6-3 21 5 -5 2

USD/INR Bullish -0.4 0.3 -0.2 -0.3 -0.4 -0.4 0.0WTI

-0.41 11 4 0 3

USD/IDR Neutral -0.3 0.3 -0.1 -0.6 0.0 -0.2 0.4US10

-0.6-3 4 -3 8 5

USD/MYR Neutral -0.5 0.3 -0.2 -0.5 0.0 -0.3 0.3WTI

-0.4-1 17 -2 3 250

50

50

50

50

50

50

50

50

50

100

100

100

100

100

100

100

100

100

100

200

200

200

200

200

200

200

200

200

200

-20 -10 0 10 20

Strong support/resistance


-4 -2 0 2 4 -20-10 0 102030

% from spot

3m z-score

Forecasted % from spot

Short Long

Sorted by average G10 correlation

Strongest Weakest

(1m - 3m) correlation

Fcast ∆ to Q416 (%)Risk Reversals

Rate differential

20



COMMODITIES AT A GLANCE1-Month correlation History and Forecasts

100d WTI SPX VIX DXY US10

US

data CRB

Largest

3mΔ Δm Δy Δytd Consensus TD

Gold 0.0 -0.2 0.2 -0.7 0.0 -0.1 -0.3VIX

+0.312 3 16 -7 -4

Silver -0.1 -0.2 0.0 -0.7 0.2 -0.3 -0.4SPX

-0.57 -8 10 1 7

Platinum 0.5 -0.1 0.1 -0.4 0.1 -0.1 0.0VIX

+0.59 -20 5 11 1

Palladium 0.6 0.1 -0.1 0.2 0.2 -0.2 0.1VIX

+0.30 -39 -13 43 32

Copper 0.4 0.5 -0.4 0.2 0.2 0.0 0.1DXY

+0.44 -20 -1 8 2

Zinc 0.6 0.5 -0.4 0.3 0.5 0.3 0.0US10

+0.616 -15 10 4 12

Lead 0.6 0.5 -0.4 0.0 0.5 -0.1 -0.2US10

+0.63 -4 -6 11 20

Nickel 0.4 0.3 -0.2 0.1 0.1 0.3 0.4CRB

+0.6-2 -41 -3 15 89

Aluminum 0.3 0.2 0.0 -0.2 0.1 0.5 0.3US data

+0.66 -12 5 4 26

Molybdenum 0.1 -0.3 0.5 -0.5 0.0 -0.2 -0.2DXY

-0.61 -27 1 23 78

Iron Ore 0.2 0.0 0.1 -0.1 0.1 -0.1 0.1CRB

+0.214 -27 9 -8 59

WTI 0.9 0.5 -0.4 0.1 0.6 0.2 -0.1US data

+0.46 -37 -13 45 87

Brent 1.0 0.6 -0.5 0.1 0.5 0.2 -0.1US data

+0.49 -51 -11 38 72

NatGas 0.2 -0.4 0.4 -0.2 0.0 0.0 -0.1VIX

+0.4-20 -40 -26 62 50

Heating Oil 0.9 0.5 -0.5 0.2 0.5 0.2 -0.2US data

+0.512 -50 -5 77 124

Gasoline 0.8 0.6 -0.4 0.2 0.5 -0.1 -0.3SPX

+0.4-2 -41 -20 … 122

AECO Nat Gas 0.2 -0.4 0.4 -0.3 -0.2 -0.1 0.0SPX

-0.4-24 -44 -32 … 17050

50

50

50

50

50

50

50

50

50

50

50

50

50

50

50

50

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

200

200

200

200

200

200

200

200

200

200

200

200

200

200

200

200

200

Fcast ∆ to Q416 (%)

Thermal coal 0.0 0.1 -0.1 -0.2 -0.1 0.2 0.3CRB

+0.5-1 -25 -2 … 450 100 200

-15 0 15 30 45 60 75


% from spot Forecasted % from spot

Sorted by average commodity correlation

Strongest Weakest

(1m-3m) correlation-100 0 100 200

21


Forecasts

Spot

Feb 25, 2016 Q1 F Q2 F Q3 F Q4 F Q1 F Q2 F Q3 F Q4 F

Fed Funds Rate 0.50 0.50 0.75 0.75 1.00 1.00 1.25 1.25 1.50

3m 0.33 0.30 0.55 0.55 0.80 0.80 1.05 1.05 1.30

2y 0.72 0.70 0.90 1.00 1.25 1.30 1.45 1.50 1.70

5y 1.17 1.20 1.40 1.50 1.75 1.80 2.00 2.05 2.25

10y 1.71 1.80 2.00 2.05 2.30 2.30 2.40 2.45 2.60

30y 2.58 2.60 2.80 2.85 3.05 3.05 3.10 3.15 3.25

Overnight Rate 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50

3m 0.47 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.60

2y 0.50 0.40 0.45 0.55 0.65 0.75 0.85 0.95 1.15

5y 0.64 0.60 0.70 0.85 1.05 1.25 1.40 1.55 1.70

10y 1.15 1.20 1.35 1.45 1.70 1.80 2.00 2.10 2.30

30y 1.94 1.95 2.10 2.20 2.35 2.40 2.50 2.60 2.80

Cash Target Rate 2.00 2.00 2.00 2.00 2.00 2.25 2.50 2.75 3.00

3m 2.29 2.25 2.25 2.25 2.30 2.50 2.70 2.95 3.20

3y 1.74 1.80 1.90 2.00 2.25 2.50 2.65 2.80 3.15

5y 1.92 2.00 2.10 2.20 2.45 2.70 2.80 3.10 3.20

10y 2.40 2.40 2.50 2.55 2.80 3.00 3.10 3.30 3.40

Cash Target Rate 2.50 2.50 2.50 2.50 2.50 2.75 3.00 3.25 3.50

3m 2.58 2.75 2.75 2.75 2.80 2.95 3.20 3.45 3.75

2y 2.25 2.45 2.45 2.50 2.60 2.90 3.15 3.40 3.60

3y 2.32 2.55 2.65 2.75 2.85 3.05 3.25 3.45 3.65

10y 2.65 3.10 3.15 3.25 3.35 3.45 3.65 3.80 4.00

ECB Depo Rate -0.30 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50 -0.50

3m -0.62 -0.65 -0.60 -0.60 -0.60 -0.60 -0.60 -0.50 -0.50

2y -0.54 -0.65 -0.55 -0.45 -0.35 -0.25 -0.15 -0.10 0.00

5y -0.35 -0.45 -0.10 0.10 0.15 0.30 0.40 0.70 1.00

10y 0.15 -0.05 0.30 0.60 0.70 0.85 1.05 1.20 1.40

30y 0.84 0.75 1.10 1.20 1.40 1.50 1.70 2.10 2.30

Bank Rate 0.50 0.50 0.50 0.50 0.75 0.75 1.00 1.00 1.25

3m 0.47 0.50 0.50 0.60 0.90 1.05 1.15 1.25 1.40

2y 0.33 0.35 0.55 0.75 1.05 1.15 1.35 1.40 1.55

5y 0.71 0.80 1.00 1.30 1.50 1.90 2.05 2.10 2.25

10y 1.39 1.45 1.70 1.95 2.10 2.20 2.40 2.45 2.60

30y 2.36 2.30 2.40 2.60 2.80 2.95 3.15 3.25 3.40

Deposit Rate 0.75 0.50 0.25 0.25 0.25 0.25 0.25 0.25 0.25

3m 0.61 0.45 0.20 0.20 0.20 0.20 0.20 0.20 0.20

1y 0.51 0.60 0.50 0.65 0.75 0.85 1.05 1.15 1.25

3y 0.54 0.75 0.60 0.85 1.05 1.20 1.50 1.70 1.90

10y 1.17 1.40 1.30 1.45 1.60 1.80 1.90 2.00 2.15

2017

SUMMARY G10 RATES FORECASTS

2016

EU

RO

PE

Germ

an

yU

KN

orw

ay

DO

LL

AR

BL

OC

Un

ited

Sta

tes

Can

ad

aA

ustr

ali

aN

ew

Zeala

nd

22


Forecasts

Spot


USD/JPY 112.8 110.0 113.0 116.0 118.0 121.0 121.0 122.0 122.0

EUR/USD 1.10 1.10 1.07 1.10 1.08 1.12 1.10 1.14 1.14

GBP/USD 1.39 1.36 1.37 1.45 1.50 1.53 1.55 1.56 1.58

USD/CHF 0.99 0.99 1.03 0.99 1.00 0.95 0.98 0.96 0.96

USD/CAD 1.36 1.43 1.43 1.38 1.36 1.34 1.33 1.32 1.32

AUD/USD 0.72 0.68 0.68 0.69 0.70 0.71 0.74 0.76 0.76

NZD/USD 0.67 0.63 0.62 0.61 0.60 0.60 0.61 0.62 0.61

EUR/NOK 9.52 9.50 9.50 9.45 9.35 9.25 9.15 9.15 9.15

EUR/SEK 9.39 9.15 9.10 9.00 8.95 8.90 8.85 8.80 8.80

DXY 97.6 93.2 95.2 93.5 94.5 92.4 93.5 91.5 91.4

2016 2017

SUMMARY G10 FX FORECASTS

Spot


Gold * 1233 1165 1225 1200 1185 1185 1175 1150 1125

Silver * 15.11 15.30 16.43 16.43 16.30 16.35 16.25 15.25 15.00

Platinum * 929 850 890 925 950 975 1000 1000 1025

Palladium * 488 525 600 625 650 675 700 725 750

Copper ** 2.11 2.09 2.09 2.15 2.15 2.20 2.20 2.30 2.30

Zinc ** 0.79 0.75 0.77 0.80 0.88 0.96 1.00 1.05 1.10

Lead ** 0.76 0.79 0.81 0.85 0.92 0.96 1.00 1.02 1.02

Nickel ** 3.85 3.92 4.00 4.18 4.45 4.75 5.00 6.00 6.25

Aluminum ** 0.72 0.67 0.69 0.72 0.72 0.74 0.74 0.76 0.76

Molybdenum + 5.35 5.00 5.50 6.00 6.50 7.50 7.50 8.50 8.50

Iron Ore *+ 47 40 45 50 55 55 60 65 70

Nymex Crude Oil +- 32 30 36 46 60 60 62 64 64

Brent Crude Oil +- 34 30 36 45 59 59 61 63 63

Heating Oil -+ 1.05 1.05 1.15 1.40 1.75 1.80 1.80 1.85 1.95

Gasoline -+ 1.02 1.05 1.35 1.50 1.65 1.80 2.00 2.00 1.90

Natural Gas -- 1.74 2.25 2.30 2.45 2.60 3.25 3.10 3.40 3.60

AECO Natural Gas -- 1.26 1.80 1.70 1.75 2.00 2.55 2.50 2.70 3.00

Newcastle Thermal Coal- 62 50 52 55 75 80 80 80 80

Commodity forecasts are period averages

*London PM Fix $/oz.

+ Molybdenum equivalent to moly oxide, FOB USA

+- $/bb l

2017

SUMMARY COMMODITIES FORECASTS

2016

En

erg

yP

recio

us

meta

lsO

ther

meta

ls

23


Forecasts

Spot


Brazil 14.25 14.25 14.25 14.25 13.75 12.75 11.75 11.25 11.25

Mexico 3.75 3.75 4.00 4.00 4.25 4.25 4.50 4.50 4.75

India 6.75 6.75 6.50 6.50 6.50 6.50 6.25 6.25 6.25

Indonesia 7.00 7.00 7.00 6.75 6.75 6.75 6.75 6.75 6.75

Malaysia 3.25 3.25 3.25 3.25 3.50 3.50 3.75 3.75 4.00

Poland 1.50 1.50 1.00 1.00 1.00 1.00 1.25 1.25 1.50

Hungary 1.35 1.35 1.00 1.00 1.00 1.00 1.25 1.25 1.50

Russia 11.00 11.00 10.75 10.50 10.25 10.25 10.25 9.75 9.75

Turkey 7.50 7.50 7.00 10.00 10.00 10.00 10.00 10.50 11.00

South Africa 6.75 6.75 7.00 7.25 7.25 7.25 7.25 7.25 7.25

USD/BRL 3.93 4.20 4.35 4.40 4.35 4.30 4.25 4.20 4.20

USD/MXN 18.1 18.8 19.2 19.1 18.5 18.2 18.0 17.8 17.5

USD/CNY 6.53 6.60 6.70 6.80 6.95 7.07 7.14 7.20 7.25

USD/INR 68.7 68.3 69.7 71.0 70.8 70.6 70.4 70.2 70.0

USD/IDR 13413 13950 14250 14200 14100 14090 14080 14050 14000

USD/MYR 4.22 4.22 4.30 4.38 4.33 4.30 4.28 4.27 4.26

USD/PLN 3.96 4.08 4.25 4.18 4.37 4.20 4.25 4.08 4.06

USD/HUF 283 282 288 277 281 270 273 261 261

USD/RUB 75.9 79.4 78.1 72.0 67.5 67.0 65.4 65.0 64.5

USD/TRY 2.92 3.10 3.23 3.30 3.40 3.50 3.50 3.50 3.60

USD/ZAR 15.6 16.6 17.2 18.4 18.5 18.2 17.7 17.4 17.0

EUR/BRL 4.32 4.62 4.65 4.84 4.70 4.82 4.68 4.79 4.79

EUR/MXN 19.9 20.7 20.5 21.0 20.0 20.4 19.8 20.2 19.9

EUR/CNY 7.18 7.26 7.17 7.48 7.51 7.92 7.85 8.21 8.27

EUR/INR 75.8 75.1 74.6 78.1 76.5 79.1 77.4 80.0 79.8

EUR/IDR 14762 15345 15248 15620 15228 15781 15488 16017 15960

EUR/MYR 4.65 4.64 4.60 4.82 4.68 4.82 4.71 4.87 4.86

EUR/PLN 4.35 4.49 4.55 4.60 4.72 4.70 4.67 4.65 4.63

EUR/HUF 311 310 308 305 303 302 300 298 297

EUR/RUB 83.4 87.3 83.6 79.2 72.9 75.0 71.9 74.1 73.5

EUR/TRY 3.22 3.41 3.46 3.63 3.67 3.92 3.85 3.99 4.10

EUR/ZAR 17.1 18.3 18.4 20.2 19.9 20.4 19.4 19.8 19.4

2017

SUMMARY EMERGING MARKET FORECASTS

2016

EM

vs E

UR

Cen

tral

Ban

k R

ate

sE

M v

s U

SD

24


Global Strategy

USA

Canada

Australia

New Zealand

UK

Europe

Emerging Markets

FX & Commodities

GLOBAL STRATEGY TEAM

Richard Kelly Head of Global Strategy 44 20 7786 8448

Global Macro Strategy

David Tulk Head of Global Macro Strategy 1 416 983 0445

Millan Mulraine Deputy Chief US Macro Strategist 1 212 827 7186

Annette Beacher Chief Asia-Pacific Macro Strategist 65 6500 8047

Jacqui Douglas Chief European Macro Strategist (On leave) 44 20 7786 8439

James Rossiter Senior Global Strategist 44 20 7786 8422

Robert Both Macro Strategist 1 416 944 5472

Global Rates Strategy

Priya Misra Head of Global Rates Strategy 1 212 827 7156

Andrew Kelvin Senior Rates Strategist 1 416 983 7184

Gennadiy Goldberg Rates Strategist 1 212 827 7180

Prash Newnaha Rates Strategist 65 6500 8047

Renuka Fernandez Senior Rates Strategist 44 20 7786 8408

Cheng Chen Rates Strategist 1 212 827 7183

FX Strategy

Ned Rumpeltin European Head of FX Strategy 44 20 7786 8420

Mark McCormick North American Head of FX Strategy 1 212 827 7190

Mazen Issa Senior FX Strategist 1 212 827 7182

Emerging Markets Strategy

Cristian Maggio Head of Emerging Markets Strategy 44 20 7786 8436

Paul Fage Senior Emerging Markets Strategist 44 20 7786 8424

Sacha Tihanyi Senior Emerging Markets Strategist 1 212 827 7043

Commodities Strategy

Bart Melek Head of Commodity Strategy 1 416 983 9288

Mike Dragosits Senior Commodity Strategist 1 416 983 8075

https://www.tdsresearch.com/currency-rates/loadEconByRegion.action?currentGeoId=4








25


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India, South Korea and Other Locations in Asia: TD Bank has representative offices in Mumbai and Singapore which should be contacted for any general enquiry related to TD Securities. In locations in Asia where TD Securities does not hold a license to conduct business in financial services, it is not TD Securities’ intention to, and the information contained in this document should not be construed as conducting any regulated financial activity, including dealing in, or the provision of advice in relation to, any regulated instrument or product.

Japan: For Japanese residents, please note that TD Securities is not licensed in Japan and this is being provided to you under a relevant exemption to the Financial Instruments and Ex-change Law.

People's Republic of China: Insofar as the document is received by any persons in the People's Republic of China (which, for such purposes, does not include Hong Kong, Macau or Taiwan), it is intended only to be issued to persons who have the relevant qualifications to engage in the investment activity mentioned in this document. The recipient is responsible for obtaining all relevant government regulatory approvals and licenses themselves, and represents and warrants to TD Securities that the recipient's investments in those securities do not violate any PRC law or regulation, including, but not limited to, any relevant foreign exchange regulations or overseas investment regulations. TD Bank has a representative office in Shanghai, which should be contacted for any general enquiry related to TD Securities. However, neither TD Securities nor the Shanghai representative office of TD Bank is permitted to conduct substantial business within the borders of the People's Republic of China.

Singapore: This document is intended to be issued in Singapore only to Institutional Investors or Accredited Investors as defined under the Securities and Futures Act. Recipients of the analysis or report are to contact the financial adviser in Singapore in respect of any matters arising from, or in connection with, the analysis or report. Recommendations are intended for general circulation and do not take into account the specific investment objectives, financial situation or particular needs of any particular person. Advice should be sought from a financial adviser regarding the suitability of the investment product, taking into account the specific investment objectives, financia l situation or particular needs of any person in receipt of the recommendation, before the person makes a commitment to purchase the investment product. TD Bank, Singapore Branch, is regulated by the Monetary Authority of Singapore.

United Kingdom and Europe: This document is prepared, issued or approved for issuance in the UK and Europe by TD Securities Limited in respect of investment business as agent and introducer for TD Bank. The Toronto-Dominion Bank is authorised by the Prudential Regulation Authority and subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. TD Securities Limited is authorised and regulated by the Financial Conduct Authority. Insofar as the document is issued in or to the United Kingdom or Europe, it is intended only to be issued to persons who (i) are persons falling within Article 19(5) ("Investment professional") of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"), (ii) are persons falling within Article 49(2)(a) to (d) ("High net worth companies, unincorporated associations, etc.") of the Financial Promotion Order, or (iii) are persons to whom an invitation or inducement to engage in investment activity ( within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated. European clients wishing to effect transac-tions in any security discussed herein should do so through a qualified salesperson of TD Securities Limited. Insofar as the information in this report is issued in the U.K. and Europe, it has been issued with the prior approval of TD Securities Limited.

United States: U.S. clients wishing to effect transactions in any security discussed herein must do so through a registered representative of TD Securities (USA) LLC.

TD Securities is a trademark of TD Bank and represents TD Securities Inc., TD Securities (USA) LLC and TD Securities Limited and certain investment and corporate banking activities of TD Bank and its subsidiaries.

© Copyright 2015 The Toronto-Dominion Bank. All rights reserved.

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