Eurex, the global derivatives exchange, will introduce Options on Euro-Buxl® Futures (OGBX) on 28 September. This euro-denominated product provides market participants with an efficient and cost-effective listed instrument that extends hedging and trading opportunities at the very long end of the interest rate curve.
Strong interest in the long end of the curve
The long end of the German yield curve has benefited from the European Central Bank’s quantitative easing program, as investors turn to longer duration exposure in search of yield. Today, the 30-year point of the yield curve is the only remaining tenor that has a positive yield.
Volumes of Euro-Buxl (FGBX) Futures in Q1 2020 have been driven by the flattening of 10 year versus 30 year interest rate swaps. Average daily volume in Q1 2020 was 78,000 contracts per day, up by 46% compared to 2019. Open interest has doubled in the past two years, reaching up to 300,000 contracts.
Particularly attractive to the buy side
Options on Euro-Buxl Futures are particularly attractive to fund managers…
- …who want to protect their bond portfolio against rate movements,
- …who want to hedge risks from government bond versus swap risk,
- …who want to enhance returns with options strategies such as covered call writing,
- …who want to trade the volatility of the euro curve against that of the USD, or
- …who want to trade 10 year versus 30 year volatility.
“By adding Options on Euro-Buxl Futures, Eurex will complete its suite of exchange-traded interest rate derivatives which support market participants in navigating through volatile times. Buy-side clients in particular have expressed their interest in listed Buxl options and we feel it will be additive to the volumes in Buxl futures,” explained Lee Bartholomew, Head of Fixed Income ETD Product Design.
Starting with EURIBOR futures through Schatz, Bobl and Bund to Buxl derivatives, Eurex now covers the entire range between 3 month and 30 year tenors. Eurex also offers derivatives on French, Italian, Spanish and Swiss government bonds. With an annual turnover of 560 million traded contracts worth a notional value of EUR 83 trillion, Eurex is leading in euro interest rate derivatives.