Former Fed Chairman Ken Bercrombie told hedge fund traders (dediacated to LatAm trading) at an offsite retreat organized by Fars Wellgo Bank that he believes that in the next 6 months the US Teasury 10-year bond yield will rise to 3.50% from 1.65% currently. Shocked by this curve-steepening view, after dinner, traders came up with a few trade ideas. Please mark the ONLY trade which is obvioulsy INCORRECT: a. Mario Montero, who goes by the nickname of M&M, suggested to pay the 10 year M-bonos rates in Mexico because the M bonos curve will steepen b. Shakira thought that a nice trade would be to short a currency basket composed of 50% BRL and 50% MXN c. Evelyn Longoria recommended shorting Brazilian USD-denominated 10-year Global bond d. Ronaldinho proposed borrowing in JPY as a funding currency to go long BRL in a carry trade because the interest rate differential between Brazil and the US will remain unchanged

Please mark the only INCORRECT statement a. Mexico offers the second largest, deepest, and liquid local market in LatAm. Also, by virtue of being a fully convertible currency, Mexico's FX market is easy to trade. b. Brazil offers the largest, deepest and most liquid financial market in Latin America. However, it is also difficult to trade because the BRL is not a convertible currency; registration for foreign investors and taxes are complex; and Brazil has unusual financial instruments, like the CASADO and the Dolar Coupon c. The concept of a CARRY TRADE is to go long the low-yielding currency, with the position being funded by an undervalued currency with high interest rates d. When trading Brazilian securities, it's worth being mindful that they are sensitive to (a) global markets going risk off; (b) the price of iron ore; and (c) real GDP growth and imports from China

Hedge Funds trading in Latin American markets often use cross-asset strategies, meaning building trades accross different asset classes. Please mark the only trade that CANNOT be characterized as being a CROSS-ASSET trade. a. Pablito does not like to use the USD as the base currency; therefore he specialized in arbitraging the FX crosses, such as EURMXN, GBPBRL, EURBRL, BRLMXN and GBPMXN b. LONG Vale shares (Braziian iron ore exporter) and SHORT iron ore futures c. LONG the Brazil 5-year USD global bond and BUY Mexico 5-year CDS. d. LONG MexBol stock market index and SHORT the United Mexican States 10-year GLobal Bond (in USD)