EGB OPTIONS: Schatz 1x2 Call Spread Buyer

Asked whether traders are getting ahead of themselves in pricing in rate hikes in H2 2026, Macklem doesn't exactly dismiss the possibility, noting that BOC will be assessing data in a "symmetric way" in looking for material changes in "either direction":

• "Given how we see things right now, we think the policy rate is about right... how we see things going forward? Well, that's a more difficult question, and I'm not going to put our policy on a timeline. What markets can count on is, we're going to take our decisions one at a time based on the best available information."
• "The other thing I would point markets to is, we're going to be assessing incoming data relative to our outlook, and we'll be doing that in a symmetric way. If our outlook changes materially in either direction, either because there's a big shock, or because there's an accumulation of evidence, one way or the other, we're prepared to respond."

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)

• BOC SAYS WILL BE SYMMETRIC IN REVIEWING DATA VS FORECAST