Pair Trade Analysis Long Euro Buxl and Short Euro Bund

1. Pair Trade Analysis Long Euro Buxl and Short Euro Bund ByCentury Financialin 'Investment Insights' Share *Trading in the financial market carries risk and can result in loss of capital. *Statistics or Past performance is no guarantee of future results The product and investment ideas do not consider the risk profile and financial position of the recipient and may not be suitable for everyone. Trading in financial markets and the use of leverage involves a significant risk of loss, which can exceed deposits. Please read the complete Disclaimer carefully Risk and Assumptions: The flyer analyses the performance of Long Buxl and Short Bund pair spread trade in different scenarios The spread scenarios mentioned and the corresponding prices for the instruments are hypothetical in nature. This does not represent the actual expected price performance. The numbers mentioned for holding costs are as per the currently available rates. This may change at the purview of the platform provider and might affect the mentioned performance drastically. A Pair trade is always taken together and closed together. If one leg is closed and the other is left open, it's no longer a pair strategy and could result in huge losses. Any further change in the underlying macros apart from the ones mentioned below may result in significant deviations in the pair's spread ratio performance and may adversely affect the pair's performance. Long Euro Buxl - Short Euro Bund Spread Trade Analysis

2. The narrowing of Buxl premium over the Bund over the past 18-month period has potentially run its course. While the spread went below zero in May month, Buxl's premium over Bund has risen in last month's trade. Traditionally, the premium is based on investor risk to hold a longer-duration bond future compared to short-duration bund futures. The ongoing ECB rate hike events have distorted the overall interest rate markets, causing a spike in short-term interest rates over the long term while also causing the curve inversion. Rationale Technically, the spread ratio of the long-duration Buxl futures over the short-duration Bund futures has taken support near the zero level. At the macro level, the recent data release from the Eurozone and Germany saw the regions slipping into recession. Investors often take refuge in long-duration bond futures during slower growth and recession periods. While the ECB is still likely to continue to sound hawkish, the markets have likely discounted much of the sharp moves on the interest rate side. This is based on the expected scenario of slower growth likely to force the ECB to hold rates without more aggressive rate hikes. Will Buxl's rebound over Bund continue? What is the Holding Cost currently applicable on the pair? While a long position in Buxl Cash is currently yielding 1.018%, the short position in Bund requires investor to pay 2.21% yearly. On net basis, the investor will be required to pay 1.19% annualy. What are the expected scenarios for the spread to move? Please refer to the performance and Scenarios Table Chart: Euro Buxl and Euro Bund Spread (Source: Bloomberg) (Legend: UB1 - Euro Buxl | RX1 - Euro Bund) Euro Buxl and Euro Bund Spread Generic Buxl Contract Last Price € 139.96 Generic Bund Contract Last Price € 134.23 Current Spread € 5.73 Last 30 Month Mean Spread € 23.49

3. Last 1 year Mean Spread € 9.95 Exposure Size in units ( Each Side) 750 Notional Exposure Size for Euro Buxl € 104,970.00 Notional Exposure Size for Euro Bund€ 100,672.50 *Source: Bloomberg Expected Spread Scenarios (Hypothetical ) - Long Euro Buxl and Short Euro Bund Pair When the Spread Performance Expected Buxl Price Expected Bund Price SpreadExpected P & L on Long Buxl Position Expected P & L on Short Bund Position Expected Gross Pair P & L Increases to 10 € 144.96 € 134.00 € 10.96€ 3,750.00 € 172.50 € 3,922.50 Increases to 15 € 147.96 € 132.23 € 15.73€ 6,000.00 € 1,500.00 € 7,500.00 Decreases to 0 € 138.46 € 138.33 € 0.13 -€ 1,125.00 -€ 3,075.00 -€ 4,200.00 Decreases to -5 € 134.96 € 139.23 -€ 4.27 -€ 3,750.00 -€ 3,750.00 -€ 7,500.00 The figures for P & L do not include commision and other charges The prices for generic contracts are based on the Bloomberg contract data available. The actual active Buxl and Bund futures prices may differ from their generic contract quotes Risks and Assumptions for Back-tested trading strategies The risks and assumptions listed here are not intended to be an exhaustive summary of all the risks and assumptions involved.

4. The strategy might suffer from look-ahead bias which occurs due to the use of information or data in a study or simulation that would not have been known or available during the period being analyzed. This can lead to inaccurate results in the study or simulation. Future price movements may not be exactly the same as the historical price movements and this could lead to variation in performance. Testing can sometimes lead to over-optimization. This is a condition where performance results are tuned so high to the past they are no longer as accurate in the future. The model assumes no slippages in trading. Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed. Drawdowns in actual trading can be higher than the tested system and losses could be significant in the event of leverage. Unforeseen events can lead to variation in performance from the tested trading strategy.

5. The tested result has been computed with price feeds available from Bloomberg. The testing environment has not considered transaction or any other costs. Trading indicators used for the purpose of testing has been provided by Bloomberg. The strategy might suffer from data mining fallacy, selection bias and backfill bias. Data Source:Bloomberg Data & Prices as of: 29/06/2023 Arun Leslie John Chief Market Analyst