BONDS: MNI Europe Pi: Gilts Flat Into Roll, But Overall Long-Leaning

Euribor options activity has moderated a little compared to the previous two weeks, but remains healthy. Participants continue to eye Friday’s October flash PMIs for the next update on Eurozone growth momentum. A weak set of figures would work in favour of recent upside interest, and potentially spur a fresh round of positions looking for an additional ECB rate cut this cycle.

• Call volumes and OI changes continue to outstrip puts. Note that while this has encompassed familiar upside structures expiring in the first half of next year, we’ve also seen examples of paper selling call spreads in the last few sessions.
• Front-end vol has rebounded modestly this month, which alongside rallies in outright futures has benefitted dovish option structures bought in recent weeks. We’ve previously noted significant interest in M6 options, with participants likely viewing the June 2026 expiry as providing sufficient flexibility around the potential timing of an additional ECB rate cut.
• The price of a 98.75 M6 call bought for 1.25 ticks on October 10 has now crept up to 1.75 ticks (data according to Bloomberg).
• Open interest in M6 options currently totals just over 3 million contracts, skewed towards calls. This is only slightly below total H6 option OI (data as of yesterday).
• The 98.25 strike continues to command the largest OI across the next 18 months’ worth of options expiries. 

Belgium has announced it will be looking to sell the following at its auction next Monday, October 27:

• the 2.60% Oct-30 OLO (ISIN: BE0000365743)
• the 1.25% Apr-33 Green OLO (ISIN: BE0000346552)
• the 3.10% Jun-35 OLO (ISIN: BE0000363722)

A reminder that Belgium just cancelled their November 24 OLO auction, making next Monday's offering the last one of the year. The size announcement for the auction will follow this Friday.

House Speaker Mike Johnson (R-LA) told reporters that he doesn't expect to move a Russia sanctions bill during the US government shutdown. Johnson's comments come after Senate Majority Leader John Thune (R-SD) indicated to reporters yesterday that the Senate is putting the bipartisan Russia sanctions bill back on pause, after President Donald Trump's call -  and potential upcoming meeting - with Russian President Vladimir Putin. 

• Johnosn said: “What we need right now is we need good faith on the part of Russia. That they would come to the table to work on a diplomatic solution to bring this to an end. The President is trying to force that in every way he can. The Republicans in Congress are ready to provide support for that and any leverage that we can, including sanctions we're open to and we’ll see how that develops.”
• Thune said yesterday, “At least at the moment, we’re kind of hitting the pause button. We’ve been trying to do this all along in concert with the White House.”
• Senator Lindsay Graham (R-SC), the bill's coauthor, said yesterday: “I think they’re thinking that... See how this meeting goes in a couple of weeks with Putin.”
• The GOP leaders' position is a notable pivot from last week, when Thune said he didn’t “want to commit to a hard deadline, but it will be soon.” He said he would schedule a vote on the measure in the “next 30 days,” per Bloomberg.