EUR Vol: Top left above 200 annualised
Top left above 200 annualised
Vols were bid from the open today as European banking shares faced selling pressure after UBS bought Credit Suisse in a deal that valued Credit Suisse’s €17bn AT1 bond portfolio at zero.
The magnitude of the latest move has seen vols on the left-hand side surge up to 20 normals today, and push several pieces over 200 annualised to near the highs of 2022. For example 1m2y - the highest point on the surface - is being marked 20 normals higher at 208.5 having peaked around 218 during July last year.
In the underlying, Euribors rallied up to 20bps in the morning session but have since pared gains and were last trading up to 9bps higher. The Bund future has also retreated and was last down 40 ticks after gaining as much as 2.1 points earlier today.
“The vol market tends to lead the underlying and the bids (in vol) suggest that we are not out of the woods yet,” said one euro trader. Meanwhile, in skew he noted, “some interest in payers and payer type structures,” in recent sessions.
For euro option trades on the SDR see here and for volumes please see here. Note that the Total Derivatives SDR now shows broker/platform information for each trade, where available.
Close 10y10y vs 5y5y - BNPP
Strategists at BNP Paribas close out the bank’s long 10y10y vs short 5y5y straddle entered in late February. The bank explains:
- “Although we maintain this belief on a medium-term view, the recent banking sector concern has led to high levels of volatility in the markets. This increased realised volatility and short-end rate uncertainty has seen implied vols in the top left outperform, pushing our trade idea to its stop level in the forward vol trade. For now we remain on the side-lines and, given the current environment, look for more tactical vol trades. We may look to re-initiate structural dislocation reversion trades at a later stage, but judge that the current environment is not conducive to such positions.”
New structured issues
For a summary of recent structured issuance, see EUR MTNs including Italy's recent collared CMS