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Fixed Income Highlights - April 2018 edition

Release date: 13 Apr 2018 | Eurex Exchange

Fixed Income Highlights - April 2018 edition

Market briefing

Lee Bartholomew, Head of Fixed Income & FX Product R&D, Eurex

Facts & figures

In March 2018, Eurex Clearing's OTC interest rate derivatives (IRD) segment saw a record activity after the successful launch of the new Partnership Program. Volumes increased around eleven fold compared to March 2017 with a total of EUR 1.7 trillion notional cleared. The total notional outstanding reached EUR 4.7 trillion compared to EUR 1.2 trillion in March 2017. The overall market share for EUR OTC IRD has been increasing significantly and now stands at 5% based upon notional outstanding. This is a result of capturing 11% market share in FRAs and 4% in IRS. 

Eurex Clearing's Partnership Program is designed to create a liquid, EU-based alternative for the clearing of interest rate swaps. Since its launch in October 2017, the program received broad market acceptance with participants from the U.S., the United Kingdom, Asia and Continental Europe joining the program. This has resulted in direct benefits for all Eurex participants through increased liquidity and greater price transparency.

Within the program, Eurex Clearing shares a significant part of the economics of its interest rate swap segment with the ten most active participants. In addition, it opens up its governance structure, thus ensuring that clients participate in the strategic development of Eurex Clearing.

Focus Derivatives: BTP Options Mark New Daily Volume Record after the Italian Elections 2018

European government bond spreads reacted strongly to the outcome of the Italian elections with the Bund/BTP (multi-year treasury bonds) spread widening as much as 12 basis points on the day the election results were announced. Since the elections, the spread retracted to levels of 130 basis points and lower, and the spread of implied volatility between at-the-money Bund and BTP options dropped from over 3 to under 2 percent.

In 2017, Eurex extended its fixed income offering with a number of new products, among them the launch of Options on Euro-BTP Futures (OBTP) on 2 October. Besides directional positioning with calls and puts, BTP options are often used in trading strategies geared at utilizing the volatility skew such as ladders and butterflies. In March Eurex saw record volumes in a segment which is going from strength to strength as investors are looking holistically across Europe for opportunities. Most notable was a trade of 16,000 contracts as part of a put butterfly marking a new level of liquidity available to investors. Daily volume has more than doubled in 2018 to 3,700 contracts, as the number of active members and open interest continues to grow, which now stands above 50,000 contracts.

This year's annual conference will focus on the key issues that will shape the derivatives industry of the future - including product innovation across asset classes, fintech and geopolitical issues such as Brexit - and assess how ready market participants are in regards to the challenges and opportunities that lie ahead. Join our product-focused breakout sessions, listen to our innovation panel and take the opportunity to network with your peers.

Derivatives Forum 2018
Frankfurt: 17 May 2018 (Hilton Hotel)
Paris: 19 June 2018
Amsterdam: 21 June 2018
Stockholm: 12 September 2018
London: 1 November 2018