EUR Vol: 1y tails active; Vega steadies

Financial chart 24 Nov 2021
Euro implieds are finishing the session slightly firmer across the grid. Vega has steadied while 1y tails saw some action.

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  • 1y tails active; Vega stalls
  • New structured issues

    1y tails active; Vega stalls
    Euro implieds are finishing the session mostly higher across the grid as yields rose during the afternoon session. “Things were looking slightly more stable to begin with but then everything turned slightly better bid as rates started selling off again,” said one trader.

    In the underlying, the front-end was under pressure from the open after the overnight FOMC while the Bund began selling off later in the day following a hawkish BOE meeting. Red Euribors are finishing around 11bps lower while the Bund future has sold off by a point compared to a drop of 160 ticks in the gilt. BTPs outperformed despite the approaching election.

    In the market, there was plenty of action in 1y tails with prints going through including 3y1y at 186.5bps, 4y1y at 205bps and 5y1y at 216bps. Note that vega prints with shorter tails are sometimes associated with hedging of callable structures although sources were unable to confirm specific flows.

    A few longer-dated vega pieces traded including 4y20y at 2580bps, 5y20y at 2701bps and 6y20y at 2809bps. “It’s true that area had been holding up well in recent sessions, but it seems to have stalled as the forwards aren’t moving so much,” a dealer said. "Also, dollar vols came off sharply after the Fed and that fed through (to the euro vol market) as well," he felt, see USD Vol: Vols plummet further post-FOMC


    New structured issues

  • Morgan Stanley issued €25m 20y NC10 callable due Sep 2042. Coupon pays 4.1% with single call in Sep 2032. Self-led.

  • BNG Bank issued €70m 15y NC6 callable due Oct 2037. Coupon pays 3.193% with single call in Oct 2028. Led by Natixis.

  • Barclays issued €15m 14y NC6 callable due Oct 2028. Coupon pays 4.3% with single call in Oct 2028. Self-led.

  • SPIRE issued €25m 30y NC1 callable repack due 25 May 2052. Coupon pays 3.49% with single call in Dec 2022. Backed by unspecified repack. Led by UBS.

  • Nordic Investment Bank issued €25m 15y NC2 callable due Oct 2037. Coupon pays 3.55% with single call in Oct 2024. Led by Jefferies.