EUR Vol: Top left leads decline as yields slump

Grid surface volatility 30 Jan 2023
The top left of the grid led a decline in implieds as yields slumped lower.

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  • Top left leads decline as yields slump
  • New structured issues

    Top left leads decline as yields slump
    Euro fixed income saw another sharp rally after the latest inflation data revealed a slowdown in price rises across countries including Germany and France. The 10y Bund future surged over a point earlier in the session, adding up to gains of more than three points across three sessions, before retreating slightly to stand 73 ticks higher into the close.

    The sustained slump in yields put pressure on top left implieds with shorter expiries down up to 4 normals and reversing some of the gains from previous sessions. Meanwhile red Euribors rallied 12-15bps intraday before easing back to finish the session 7-9bps higher.

    “There was some short-covering in the past week or so, but most of that has been managed by the delta,” reported one trader. As a result, he said that flows had been “pretty light” earlier in the session despite the big move in the underlying. Although he noted that, “Month-end has brought some price discovery.”

    Elsewhere, the top right declined by about 1.5 normals while longer-dated pieces finished the session marked about 0.5 normals.

    One sector singled out for seeing some outperformance was the 5y tails as pieces such as 3m5y finished the session marginally higher, last up 0.4 at 110.4. “There’s been some richening in the flies and that’s helped to support the vol market a bit,” a trader said. 

    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.


    New structured issues

  • SPIRE issued €50m EMTN zero-coupon repack due 12 Nov 2041. Sinkable and backed by unspecified repack. Further details unavailable. Led by Credit Suisse.