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Fixed Income Market Briefing

Release date: 28 Feb 2017 | Eurex Exchange

Fixed Income Market Briefing

Latest Briefing

Lee Bartholomew

Head of Fixed Income Product Research & Development

 
 

Market Briefing – Fixed Income & FX

Fixed income markets (FIC) have started 2017 in earnest, with strong volume growth across Eurex' core markets. This has been further reflected in the performance of FIC across the financial sector. Central bank divergence, geopolitical risks and the macroeconomic back drop has persisted which has boosted trading in our core products. We have seen record open interest and volumes in French OAT's as government bond spreads continue to widen. Generally, the has given more opportunities for participants to trade with decent risk/reward in government bond spread widening as election risk premium remained elevated. With more supply coming in the +15y sector, volumes should remain robust.

February is looking set to close strongly, with good volumes trading In the roll. As we approach the French elections, I'd expect to see a pick-up in periphery markets and increased volatility in the underlying markets.

Lee Bartholomew | Head of Fixed Income & FX Product R&D

Facts & figures

Heightened global political uncertainty marked the start of 2017. Event risks and economic challenges in Europe require efficient and innovative hedging tools. In addition, market participants anticipate increasing interest rate dynamics in combination with higher inflation expectations in 2017. This has prompted a strong demand for Eurex Fixed Income Derivatives.

In January, 46.7 million contracts were traded on Eurex, Europe's largest derivatives exchange - an increase of 32% from January 2016. Wednesday, 22 February marked a new daily record in 2017 with 4.1 million contracts traded.
 
The increased geopolitical risks have also translated into better volume and open interest in our Eurozone core and periphery products. The gap between the Italian and the Spanish 10-year yields is at its highest since 2012.
 
Looking at the U.S. and the release of the last FOMC meeting notes, the question still remains whether the FOMC will start the "2017 hike" at the upcoming March meeting or not.

  • French rates hedging:
    Precise hedging tools for interest rates in France.
  • Futures alternative:
    For investors, Euro-OAT Futures are an alternative to sovereign credit default swaps (CDS) following European Union rules that outlaw naked positions in CDS contracts.    
  • Enhanced basis trading:
    Provide the opportunity to trade the basis on French debt instruments and complement the French cash market.
  • Spread trading:
    A liquid alternative to cash bonds for trading the respective yield spread between German and French debt instruments.

Events

Eurex will be present at numerous events and trade fairs during the year. Please visit our website for an overview of upcoming conferences.

 

Eurex Exchange's Fixed Income Highlights

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Market Briefing – Fixed Income & FX Fixed income markets (FIC) have started 2017 in earnest, with strong volume growth across Eurex' core markets.

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