ECB: De Guindos On Factors Behind Euro Strength This Year
Sep-18 09:28
De Guindos doesn't quantify the split between exogenous and endogenous factors behind euro strength this year:
- On the exchange rate, it’s the consequence of different forces and drivers. Part of the narrative at the beginning of the year (when people were looking at parity) was that the imposition of tariffs would be partly offset by the appreciation of the dollar but that hasn’t been the case. These US policies have perhaps dented the confidence in the US economy and there aren’t so many places to invest. This dented confidence gave rise to an increase in confidence in Europe – it’s a holistic approach. I don’t know how much is exogenous vs endogenous but you need a global view.
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EQUITY OPTIONS: Large Deutsche Call Spread
Aug-19 09:26
DBK (19th Sep) 34.5/35.5, bought for 0.14 in 10.5k.
EGBS: Underperform Bunds and EGB Peers On BBG ICE Report
Aug-19 09:16
- EU-bonds underperform Bunds this morning, after Bloomberg reported overnight that ICE will not include EU-wide joint debt in its sovereign bond indices.
- Difficulty in securing index inclusion is not a new challenge for EU-bonds, with ICE rejecting a similar proposal last year.
- The Bloomberg report noted that “Even supporters of the change [i.e. to include in indices] commented that the EU is something neither/nor, something of a sub-sovereign or supra-sovereign agency rather than a typical sovereign entity”
- 10-year spreads are 2.5bps wider today at ~31.5bps, with other EGB spreads to Bunds up to 1bp tighter on the session.
- The combination of increased German issuance expectations and a pullback in EUR rates vol have contributed to broad-based EGB spread tightening to Bunds since the start of May. EU-bonds have participated in this dynamic, closely tracking similarly priced peers like RAGBs during the period.
SOFR OPTIONS: Notable Call Fly buyer
Aug-19 09:07
SFRU5 96.00/96.125/96.25c fly, bought for 0.75 in 18k total.
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