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SocGen Identify Preference For Selling EUR Short Rate Volatility

EGBS

Late yesterday Societe Generale noted that “rates volatility tends to decline, led by the front end, as the rate-hiking cycle matures. The ECB is approaching the end of hikes and Christine Lagarde just said that a pause in September is possible. EUR rates are now choppy, but rangy, and EUR swaption vol is still high from a historical perspective. We expect EUR vols to continue declining, with the ECB reaching terminal rate but not ready for cuts. We see value in options to target a rangy rates market for the coming months.”

  • They have recommended selling the EUR 6m2y 3.60/3.80 strangle vs. buying 75% of notional 3.40/4.00 strangle.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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