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Fixed Income Highlights - February 2018 edition

Release date: 22 Feb 2018 | Eurex Exchange

Fixed Income Highlights - February 2018 edition

Market briefing


Philip Simons, Global Head of Fixed Income Sales & Business Development, gives an update on the newest developments at Eurex, especially the OTC interest rate derivatives initiative and the Fixed Income ETD market as well as recent product launches. 

Facts & figures



Product News

Watch the first part of our interview series on fixed income ETF options. Three experts at Eurex and BlackRock share their insights into the key drivers and benefits of Eurex's listed options on fixed income ETFs.

Options are now available at Eurex on the iShares ETFs that track USD corporate bonds and USD high yield corporate bonds as well as the J.P. Morgan Emerging Market Bond ETFs. They provide ETF participants with the ability to construct a number of limited risk trading strategies and to enhance ETF portfolio returns. The recently introduced options are off to a good start in 2018, marking their first trades in January. Outright puts have traded on the iShares USD High Yield Corporate Bond ETF that are commonly used to hedge exposure to the U.S. high yield corporate bond market. Trade sizes have ranged between 1,500 and 3,000 contracts, and investors can access liquidity provided by banks in off-book trading. Three dealers are ready to quote prices to institutional clients:


In cooperation with Bloomberg, Eurex organized an event on the newly introduced Options on Euro-BTP Futures in Milan on 6 February 2018. More than 100 participants attended from a cross-section of financial institutions, amongst others: asset managers, insurers, derivatives traders and risk managers.

In the panel discussion, a pressing topic was the outcome of the upcoming elections in Italy and their impact on asset prices and trading flows in the market. The panellists agreed that the potential election result is not the only driver for recent trading activities in BTP options. General interest in trading optionality on the Italian government bond market with the benefits of central clearing and the mitigation of counterparty risk is also contributing to trading activitiy. These options were only available as OTC products to a subset of investors prior to the listing of BTP options at Eurex. The panellists expect the trading volumes to grow further, especially as they cited price discovery has massively improved since the listing, increasing market transparency.

In October 2017, Eurex added to its offering for the Italian government bond market with the launch of Options on Euro-BTP Futures (OBTP). Market participants can now benefit from an efficient, accessible and cost-effective instrument that extends hedging and trading opportunities by making the volatility in the long-term maturity range of the Italian interest rate curve tradable and offering market participants the opportunity to trade limited risk BTP directional and portfolio enhancement strategies. Since the launch of OBTP on 2 October 2017, the contract has traded 150,000 contracts. ADV in January 2018 was 2,500. Two Market Makers are actively quoting on-screen and are also providing liquidity in the off-book market. 12% is traded on-screen and 88% of volume is traded as Block Trade.


In January, the average daily volume cleared in the OTC interest rate segment increased by a factor of seven to EUR 35 billion from EUR 5 billion in 2017. Eurex Clearing's Partnership Program is designed to create a liquid, EU-based alternative for the clearing of interest rate swaps. The CCP 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. Since its launch in October 2017, the program received broad market acceptance with 25 market participants from the U.S., the U.K., Asia and Continental Europe. The successful start eases any market concerns around price quality and overall costs for the industry.

Eurex Clearing successfully passed the second EU-wide stress test

 Eurex Clearing has successfully passed the second EU-wide stress test conducted by the European Securities and Markets Authority (ESMA). The objective of this exercise is to assess central counterparties' resilience in stressed market conditions. "The stress test is an important contribution to ensuring financial stability in Europe, given the important role of central counterparties", said Thomas Laux, Chief Risk Officer at Eurex Clearing.

ESMA put the focus of the test on credit risk as well as associated liquidity risk that EU CCPs would face under different stressed market environments. Eurex Clearing passed the test in both categories. Read our CCP Risk Management brochure and find out more about how Eurex Clearing's risk management approach guarantees the integrity, transparency, efficiency and safety of financial markets.

Trader TV: Corporate bond futures


This January edition of Trader TV was joined by Eurex's Lee Bartholomew, Head of Fixed Income & FX Product R&D, giving an insight in the trading climate of the corporate bonds market. Lee looks at the initial impact of MiFID II on corporate bond liquidity as well as pricing challenges, and explains how Eurex corporate bond futures can assist the market.


Kind regards,
Philip Simons



Eurex Exchange - The home of the euro yield curve.