From: jeffrey E. <jeevacation@gmail.com> Sent: Thursday, November 5, 2015 3:52 PM To: Jabor Y. Subject: Fwd: Saudi rates and CDS

S&P cut Saudi Arab=a from A+ to AA- earlier this week as they expect the fiscal deficit will =ncrease to 16% of GDP in 2015, from 1.5% in 2014, primarily reflecting the=sharp drop in oil prices As a follow-up to the below, it is also interesting to look at playi=g the idea through FX.

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USD/SAR is currently p=gged. While our base case is that the government will defend the peg, if h=adlines get worse, revenues collapse from depressed oil prices and the gov=rnment has to address fiscal spending, we believe forward points and volatility will continue to increase. Althou=h, it may be a low probability event that the government breaks the peg, i= we look at Kazakhstan's actions in August (see chart below), we s=e buying USD call/ SAR put options as an interesting risk reward.

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USD/KZT 1yr<//=>

Source: Bloomberg 11/0=/2015
Chart 2 below shows Saudi CDS

Syr Saudi CDS