Short expiries continue to drift lower
The same theme from yesterday persisted today with shorter-dated expiries drifting lower while longer-dated expiries continued to find support and nudge higher. In the underlying, global fixed income traded weaker with the Bund future losing around 60 ticks while the 10y Bund yield has increased by 6bps to 2.215%.
One trader felt the drift lower in short-dated expiries probably made sense despite next week bringing a triple whammy of central bank meetings. “In the near-term it’s hard to see a meaningful move in either direction,” he felt.
However, he added that some pieces in the top left such as 1y1y could continue to find support given the recent decline in implieds as well as uncertainty over the pace of ECB hikes from March onwards. Note also that yesterday sources suggested the top left could be seeing some accounts playing the range and possibly buying and/or short-covering. Today 1y1y was up 0.7 at 90.7 having dipped down to 88.0 normals last week.
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