BUNDS: 3M Skew At Most Negative Since March On Continuation Chart

Bearish pressure in Bund futures this month has seen 3M 25D options skew fall to -0.23 points. On the continuation chart, this leaves put vol premium over calls at its largest since March (i.e. the immediate aftermath of the German fiscal expansion announcement). 

• This month’s hawkish repricing in EUR/EGB rates has primarily been driven by the front-end (i.e. ECB expectations for 2026-2028), but ongoing German fiscal/issuance considerations provide a further source of demand to hedge Bund downside (yield upside).
• Domestic fiscal spending is expected to ramp-up in the coming months, particularly after October budget data gave an early indication of a rise in infrastructure fund spending.
• Meanwhile, markets still await Germany’s 2026 issuance plan on December 18th.
• As noted earlier, there’s been a clear increase in Bund options volumes through December. Acknowledging the limits in interpreting positioning from the data, we observe that total RXH6 put volumes on track to exceed call volumes for the sixth consecutive session. As of yesterday, RXH6 put OI stood at 596k, compared to 358k in call OI. 

Figure 1: 3M 25D Bund Options Skew (Source: Bloomberg Finance L.P)

Figure 2: RXH6 Options Volumes and OI  (Source: Bloomberg Finance L.P)