Mixed flows as right-side leads gains
Euro implieds are finishing the session mixed with short-dated gamma in the top left of the grid edging slightly lower and reversing some of yesterday’s gains. Further out, longer-dated pieces across the right-hand side posted gains, such as 1y10y up 1.9 at 98.1nvol.
In the underlying, the Bund began the session trading lower and the momentum continued during the afternoon with the 10y future last down by 80 ticks while the 10y yield increased by 6.5bps to 2.5575%.
“There’s not been a great deal of flow,” said one euro vol dealer earlier, “There has been a bit of selling to start the new month, but that has not really been reflected on the screens as the sell-off (in rates) means that dealers tend to move their prices up a bit,” he noted.
More generally, he noted the left-hand side tends to underperform a bit while the right-hand side posts gains when the curve steepens, such as today. “Around the mid-left is where the supply has been located while gamma is more susceptible to firming as rates sell-off,” he said.
In terms of latest supply, the above dealer tended to agree that the pace of activity has seen a bit of a seasonal slowdown during the summer months.
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