EUR Vol: Lower despite intra-day vol; Callable supply

Chart numbers candles 14 Jun 2022
Euro implieds are moving lower despite intra-day volatility in the underlying market. Elsewhere, a few callables hit the screen.

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  • Lower despite intra-day vol

  • Take profit on 6m10y payer spread - BNPP

  • New structured issues 


    Lower despite intra-day vol
    Euro implieds are finishing the session lower despite a volatile intra-day session that saw the Bund take a hit after a Reuters report on ECB inflation expectations and later US CPI data.

    Still, the Bund is finishing the session near unchanged after taking a 70 tick round trip through the day, resulting in muted day-on-day realised.

    The 1y expiries have seen a fall of 1 to 1.5 normals, while further out vega has declined by 0.2 to 0.5 normals.

    Towards the bottom right of the grid, 5y10y has declined by 0.5 to 88.3nvol and has almost reversed the gains posted since early August.

    Meanwhile, in callable supply there is more evidence of a shift away from intermediate left structures, such as 5y NC2, to slightly longer-dated such as 15y NC5 callables (see new deals below). 


    Take profit on 6m10y payer spread - BNPP 

    Strategists at BNP Paribas recommend taking profit on 1x2 6m10y payer spread. In its summary, the bank writes: 


      "Post the US regional bank concerns in March, rates have traded in a range, caught between the counterbalancing forces of weakening growth and inflationary concerns. Since initiating the trade at the end of March, 10y yields have moved higher but have not tested the pre-SVB highs. As tomorrow’s ECB policy meeting approaches, the risk-reward favours taking profit, especially as yields are in the region of peak profit. Take profit on Buy ATMF/+30bp 1x2 ratio payer spread on 6m10y: Entry: -44c upfront (ESTR CSA) Allocation EUR25mn notional on ATMF leg. Closing level: +110c. P&L: EUR 385k."


    New structured issues

  • IBRD issued €50m 15y NC3 callable due Sep 2026. Coupon pays 4% with single call in Sep 2026. Led by Credit Agricole.

  • Nordic Investment Bank issued €10m 15y NC5 callable due Sep 2038. Coupon pays 3.75% with single call in Sep 2028. Led by Bred Banque Populaire.

  • NRW.Bank issued €10m 10y NC3 callable due Sep 2033. Coupon pays 3.82% with single call in Sep 2026. Led by DZ Bank.

  • Credit Agricole issued €20m inflation-linked 1.62% due 6 Sep 2035 at par. Coupon and redemption inked to euro HICPx. Self-led.