EURi: One-way only as stops hit after flash

Up arrow 8 apr 2022
Strong flash HICP data, positioning, cheap forwards and lack of supply all contributed to the strength of euro inflation today, according to dealers.

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  • One-way only as stops hit after data

  • New issues 


     One-way only as stops hit after data

    “One-way” was a trader’s succinct description of today’s price action after more strong inflation prints sparked bull-flattening along the euro inflation curve, pulling 5y5y to 2.56% (+5bps) while 1y1y jumped to 2.72% (+7bps).


    Positioning and “cheap forwards” accelerated the move, with traders seeing stops getting hit. “There’s a shortage of supply and duration,” explained one, “we saw new buyers and also real yield buyers today”.


    As for supply, Spain sold €502m of the SPGBei-33 at 1.164% with a bid to cover ratio of 1.95 but dealers dismissed the impact. “We may see some profit-taking but maybe not until a big supply event,” one added.


    Still, profit-taking did emerge for a while at around lunchtime today, according to dealers, but didn’t last long after strong US labor cost data spurred big gains for TIPS breakevens, with 5y near session highs at 2.735% (+6.5bps) at the time of writing.


    Traders confirmed it had been busy and the SDR (link) shows a long list of bilateral, Tradeweb and broker trades. Market participants highlighted EUR 5s/10s last at -20.125bps while the SDR shows €120m trading at -21bps (which may be 5y5y at 2.53%). EUR 10y went through last at 2.76%, up 6bps on the day. 


    In the data, Italian HICP printed at 9.9% - down from 10.7% last month but still 40bps above the Bloomberg consensus and also slightly above the 20-40bps beats for the HICP inflation data for France, Spain and Germany released earlier this week. Flash euro HICP came in at 8.5%, down only slightly from 8.6% in January, while core rose to 5.6% from 5.3%.         


    New issues

    • CIC last week launched a €50m (max) inflation-linked note due 26 Feb 2029 liked to  euro HICPx inflation. Self-led. 


    • Credit Agricole last week launched a €3m (max) inflation-linked note due 28 Feb 2025 liked to euro HICPx inflation. Self-led. 


    • Italy will launch a new BTP Italia due 14 Mar 2028 in the week beginning Mar 6 after announcing the minimum real coupon on Friday. Dealers are Intesa Sanpaolo and UniCredit. The most recent, €12bn BTP Italia 1.6% due Nov 2028 yields around 2.31% today versus 1.92% the day before the new bond was announced on Feb 6, while the BTPei-28 is 1.43% today. Italian FOIx inflation was 9.84% in Jan compared with euro HICPx inflation at 8.8%.