TOP 10 TRADES

Herein we provide a quick summation of our top trades for 2010. Each trade is discussed more fully in the geographic and product-specific sections of this report.

1) Long CAD / Short EUR (Page 10)

CAD should outperform EUR due to rising commodity prices and Canada's stronger structural position.

2) Long High-Yielding Major Currencies / Short Low-Yielding Major Currencies (Page 7)

Buy AUD, NZD NOK; Sell JPY, USD, GBP via equal weighted basket based on continuation of the carry trade in its present incarnation.

3) Short AUD, NZD, and NOK in Bonds / Long SEK, GBP, USD in Bonds (Page 22)

AUD, NZD, and NOK are all set to underperform the majors in bonds on monetary policy decoupling and superior growth prospects.

4) Curve Flattener in AUD, NZD, and NOK (Page 22)

AUD, NZD, and NOK should all enjoy a distinct flattening of their curves in 2010, with a disproportionate share in the 5-10 sector.

5) Long TRY / Short ZAR (Page 24)

Buy Turkish lira, sell South African rand due to greater political tolerance for Turkish lira appreciation, combined with earlier overdone appreciation of the rand.

6) Short USD / Long MXN (Page 24)

Mexico's negatives are fully priced into the currency, and it is much further away from all-time USD lows than other currencies. Mexico is among the most undervalued EM currencies.

7) Short USD / Long IDR (Page 24)

The Indonesian rupiah is an attractive buy for 2010 due to strong economic fundamentals, sound fiscal and external accounts, a very solid GDP growth outlook, and the possibility of hawkish monetary policy.

8) Short Benchmark Duration in U.S. Bonds (Page 6)

A recovering U.S. economy, an increasingly hawkish Fed, simmering inflation concerns, and bond supply indigestion all argue for higher U.S. yields over 2010.

9) U.S. Reds Steepener (Page 6)

Look for the curve between the U.S. Eurodollar futures Dec 2010 and Dec 2011 contracts to steepen on delayed (and then aggressive) Fed hiking.

10) Long Cdn 10yr / Short U.S. 10yr (Page 9)

Canadian monetary policy will be tightly linked to the U.S., yet Canada has a strong fiscal position and more credible inflation-targeting.

Full report in pdf

TD Bank Financial Group