EUR Vol: Gamma stays firm; Callable shift?

Grid surface volatility 30 Jan 2023
Gamma held onto recent gains and ticked up slightly. In euro callable issuance, there are signs of a shift back to longer-dated maturities.

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  • Gamma stays firm; Callable shift?
  • New structured issues

    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.


    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

  • KfW issued €50m 10y NC1 callable due Aug 2033. Coupon pays 4.1% with single call in Aug 2024. Led by JP Morgan.

  • SPIRE issued €25m 16y NC4 callable repack due 25 June 2039. Coupon pays 4.231% with single call in Jun 2027. Repack unconfirmed,. Led by UBS.