<table><tr><th>From:</th><th>Jeffrey Epstein &lt;jeevacation@gmail.com&gt;</th></tr><tr><td>Sent:
To:</td><td>Monday, November 22, 2010 7:42 PM
Paul S Barrett</td></tr><tr><td>Subject:</td><td>Re: 10 year swap spread</td></tr></table>

what is three month libor and why is the spread so high on treasury.?

On <u>Mon, Nov 22, 2010 at 2:41PM, Paul</u> S Barret= <paul=s.barrett@jpmorgan.com <mailto > > wrote:

Example

Buy 10MM of the 10yr treasury with a 2.625% coupo= (ytm 2.97%) =A0

Borrow $9.5MM at 3month Libor + 75bps =A0 =AO =A0

Pay fixed on $9.6=MM on a 10yr swap

Annual negative carr= (per 10MM notional) = $84,000

Monthly negative carry (per 10MM notional) = $7,000

$ value per basis point = $8,800 per basis point

=A0

So we need the spread to move lbp/month in our favor to cover the neg=tive carry.

Therefore if we put the trade on at +9bps and we move to 0bps spread =e lose (1bp of carry PLUS 9 bps of DV01) 10bps or $88,000 per 10MM.=/p>

Therefore if we put the trade on at +9bps and we move to 19bps spread=we make (-lbp of carry PLUS 10bps of DV01) 9bps or 79,200 per 10MM.=/p>

Attached spreadsheet shows more details.</=>

## This is a trade we would only do at +9. If we don't get there we don=#39;t do the trade.

Paul

=/span>

Paul Barrett, CFA

Managing Director

Global Investment Opportunities Group=/p>

JPMorgan Private Bank

*   Address: 40W 57th Street, 33rd Floor, New York, NY 10=19
*   Contact Information: Phone number and email address (blacked out).

From:=span style="font-size: l0pt;"> Jeffrey Epstein Imailto:jeevacation@gmail.comj Monday, November 22, 2010 12:48 PM To: Paul S Barrett Subject: Re: 10 year swap spread=/p>

size and move per basais point after one month taking in=o account libor????

<u>On Mon, Nov 22, 2010</u> at 9:58 AM, Paul S Barrett=<
<mailto > > wrote:

<=pan style="font-size: 11pt; color: rgb(31, 73, 125);">Swap Spread Idea:=A0 (Target entry at +9bps; currently at +15bps; target exit at +25bps)

- 1%) and the 10 year swap (2.96%) is 15 BPs. This spread has widened fro= a historic low -5 BPs in early September. As shown in the 5 year chart=below, spreads historically run around 40 BP. If we go back further, th= chart tells the same story.

## This is a trade we would only do at +9. If we don't get there we don=#39;t do the trade. (cont.)

With announced QE2, the =conomics of the 10 year treasury lead us to believe yields will likely remain capped
while the swap m=rket (represents the investor community) will be driven by economic data. If the Q4 consumer
spending and profit= numbers surprise to the upside, swaps would likely move higher relative t= Treasury yields.

To achieve this exp=sure we buy the 10 year tr=asury and pay fixed on a 10 year treasury swap. We would
match the DVO1s making us hedged for equal shifts in UST vs swaps.=A0 You would borrow 95% of the Tr=asury cost at
Libor + 75bps.

=A0 =A0 =A0

This email is confidential and subject to important disclaimers an= conditions including on offers for the
purchase or sale of securities, ac=uracy and completeness of information, viruses, confidentiality, legal pri=ilege, and
legal entity disclaimers, available at http://www.jpmorgan.c=m/pages/disclosures/email
<http://www.jp=organ.com/pages/disclosures/email> .

**********=

The information contained=in this communication is confidential, may be attorney-client privilege=, may constitute inside information, and is intended only for the use of the a=dressee. It is the property of Jeffrey Epstein Unauthorized use, di=closure or copying of this communication or any part thereof is strictl= prohibited and may be unlawful. If you have received this communication in error, p=ease notify us immediately by return e-mail or by e-mail to jeevacation@gmail.com, =nd destroy this communication and all copies thereof, including all attachm=nts.

This email is confidential and subject to important disclaimers and conditi=ns including on offers for the purchase or sale of securities, accuracy an= completeness of information, viruses, confidentiality, legal privilege, a=d legal entity disclaimers, available at http://www.jpmorgan.com/pages/=isclosures/email <http://www.jpmorgan.co=/pages/disclosures/email> .

*********

************

The information containe= in this communication is confidential, may be attorney-client privileg=d, may constitute inside information, and is intended only for the use of the a=dressee. It is the property of Jeffrey Epstein Unauthorized use, di=closure or copying of this communication or any part thereof is strictl= prohibited and may be unlawful. If you

## This is a trade we would only do at +9. If we don't get there we don=#39;t do the trade. (cont.)

have received this communication in error, p=ease notify us immediately by return e-mail or by e-mail to jeevacation@gmail.com, and destroy thi= communication and all copies thereof, including all attachments.