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Eurex Exchange’s Fixed Income Highlights - Q1/2017

10 Apr 2017

Eurex Exchange’s Fixed Income Highlights - Q1/2017

The first quarter 2017 delivered European fixed income markets a strong start to the year. As a result, across its core and periphery derivatives markets, Eurex experienced strong demand and a robust uptick in client activity to underpin a firm foundation of volume and liquidity. More broadly,

European markets have benefited from a supportive macroeconomic environment, where geopolitical and event risks have driven a pick-up in investor demand since late 2016.
European markets have had a respectable amount of event risk to absorb in the first quarter and though the overall level of euphoria surrounding some of the event risk has declined somewhat since the start of the year, Government bond spreads remain elevated. Open interest (OI) in the French Euro-OAT futures reach record levels but French/German 10y spreads have remained reasonably stable around 65bps. And although the ratio between the CAC and DAX implied volatility has declined, 1 month Bund volatility remains elevated as the underlying realizes.

It appears that the OAT/Bund spread is lagging relative to volatility measures in equity markets commensurate with the stabilization of geopolitical risks. Additionally, with the support of our members we successfully relaunched options on Euro-OAT futures where traded volumes have been steadily increasing. In light of the US Fed hiking rates in March as expected, the rates market seems to be pausing for breath and closely monitoring data. Re-inflationary pressures persist with core European inflation surprising to the upside. This, together with a supportive macroeconomic environment, suggests Q2 may be anything but dull.

For detailed facts & figures and further product news read the full newsletter.

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