Gamma stays firm; Callable shift?
The Bund spiked higher first thing, adding to the sharp rally following yesterday’s weaker-than-expected PMI data. However, that move was soon reversed and the 10y future spent most of the session near unchanged and the 10y Bund yield finished at 2.51% (unch).
Gamma ticked up a touch with shorter-dated expiries, such as 1m and 2m, gaining up to 1.5 normals. Elsewhere, the gains were pretty balanced with 3m5y, 3m10y and 3m30y all ending up around 0.5nvol higher.
In vega, most pieces were near unchanged. Still, several pieces remain at the summer highs. For instance, 5y10y is perched just above 90nvol and near the highs of the past three to four months.
In structured issuance, one of the patterns to emerge around Q1 this year was a shift to shorter-dated callable supply such as 5y NC2, leading to downward pressure on the intermediate left part of the grid.
One issuer speaking this week said that - from the reverse enquiries they were seeing - there appears to have been a move back towards longer-dated maturities with requests for structures such as 15y NC5.
New structured issues