From: Paul Morris Sent: 9/10/2015 3:56:04 PM To: Daniel Sabba CC: Stewart Oldfield Subject: RE: hi jeffrey - a trade to play on global central bank liquidity... ICI Classification: Confidential Daniel, not sure I follow this Paul Morris Managing Director Deutsche Bank Private Batik Office Cell From: Daniel Sabba Sent: Thursday, September 10, 2015 3:05 PM To: 'Jeffrey E.' Cc: Paul Morris; Todd Stevens; Stewart Oldfield; Vahe Stepanian; Ariane Dwyer; 'Richard Kahn' Subject: hi Jeffrey - a trade to play on global central bank liquidity... [C] Classification: Confidential Regardless of FOMC hiking next week, we have already observed a decrease in global central bank liquidity. We have noticed this is very correlated to USD Sy swap rates Sy forward and, consequently, to the shape of the yield curve. Given central banks play a major role in overall market liquidity, investors should consider the effects that Fed tightening and China's FX unwind will have on liquidity levels. For the last decade liquidity has been has been positive for real rates and the curve; however, as liquidity decreases this is likely to have negative implications for risk assets. See below and attached. Fed + FX reserves YoY change and 5v5v rates 30 25 20 15 10 5 0 -5 Fed plus fx reserves yoy —5y5y - its -10 2000 2002 2004 2006 2008 2010 2012 201.4 World Equities YoY and central bank reserves 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0050439 CONFIDENTIAL SDNY_GM_00196623 EFTA01361308