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Fixed Income Market Briefing

Release date: 12 Sep 2018 | Eurex Exchange

Eurex Exchange's Fixed Income Highlights September 2018

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Market Briefing

August was a strong month for Fixed Income markets in general, with strong volume growth across our core benchmark products, both in futures and options. The currency markets continued to see the largest price fluctuations, with Emerging Market (EM) currencies in particular focus, namely the Lira and Peso. This gave rates markets a boost: volatility picked up from historic lows, realised volume spiked, and skew steepened with volume seeking the downside via put spreads. Curve steepeners by way of options have also seen a small uptick in participation, which has helped underpin overall volumes. Cash markets continue to deliver better-realised moves when compared to the swaps market, although a reasonable amount of risk is not being put to work.

Geopolitical risks continue to weigh on European markets, with BTP versus Bunds spreads widening on risk-off moves. From asset-swap levels, it appears that the market is pricing in a fiscal deterioration with 10-years outperforming, which also has helped drive volumes in our core futures markets.

In September, I hope to see a continuation to the upside in volumes largely driven by geopolitical risks, EM currencies, and Brexit uncertainty.

Lee Bartholomew, Global Head of Fixed Income ETD Product Design


Facts & figures



News section

Increasing order book share in Bund options

In HY1 2018, average daily volume in Bund options was ca. 192,000 contracts, an increase of more than 15 percent versus 2017. Strategy trading was one of the driving forces. Learn more.

Italian bond yields attract investor interest

The movements in Italian bond yields due to the changes in the Italian government have attracted investor interest in BTP derivatives. This led to a renewed increase in 10 year Italian bond yields, which rose to 2.78 percent from 2.46 in mid-July and then further to 2.96 percent in the first week of August.

Eurex Clearing OTC IRD Partnership Program continues to flourish


Currently 30 participants have joined our Partnership Program. The LCH / Eurex Clearing basis has steadily reduced as a result of the increase in the number of participants and consequent volumes, down to 0.00 in 2yr, 0.00 in 5yr, 0.00 in 10yr and 0.45 in 30yr at the end of August. This reflects the balanced portfolio structure between Fixed Payer and Fixed Receiver and allows hedging and transfer of risk for Cleared Euro IRS from LCH to Eurex Clearing at the same level by way of CCP IRS Switch trades.

Events


You are invited to join us at the Derivatives Forum 2018. A joint event from Eurex, Danske Bank and SEB. The conference will feature panels on product innovation across asset classes, fintech and geopolitical issues such as Brexit, as well as other key issues that will shape the derivatives industry of the future.

 

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