EUR Vol: Still pressured despite risk sentiment souring

Chart line down Oct 2022
Euro vols stayed pressured despite risk sentiment souring slightly.

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  • Vols stay pressured

    Vols stay pressured
    Vols stayed under pressure today with near-dated expiries continuing to take the brunt of the fall as 1m3y led the way during today’s session, last down 10.3 at 172.50.


    The decline came despite reasonable activity in the underlying with the Bund future rallying over 1.5 points while risk sentiment appeared to sour amid a decline of around 1.5% in the Euro Stoxx Banks Index.

    One trader felt it perhaps made sense to see short-dated expiries coming off so sharply, “Risk sentiment may have soured a bit after US banking stocks had a wobble after the Fed, but overall people are keeping their faith in the EU to avert a banking crisis,” he said. “The immediate risk from the UK and Fed rate decisions have also been subtracted and it is perhaps hard to justify the levels,” he felt.

    Yesterday the Fed hiked by 25bps as expected while today the BOE followed suit with an expected 25bps hike.

    Meanwhile, one trader reported interest in vol curve steepeners with shorter-dated expiries underperforming relative to longer-dated pieces. “There’s been some interest in forward vol trades and that lends some of the pressure to the shorter expiries,” he explained.

    Further out, vega is also finishing the session lower with 5y10y down 2 normals at 91.9, taking it back to the levels before the before the SVB fallout.


    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.