European fixed income experts to discuss market trends

With the advent of Donald Trump to the US Presidency in late January, yields in the key European and US 10 year rates have diverged, due partly to expectations of subdued growth in Europe and stronger momentum in the US.

Europe has also seen negative swap spreads, which are relatively unusual in Europe, though they are pretty normal in the US. This has raised questions about banks’ trading models though this is possible over-stated.

These trends also come at a time of sporadic volatility in global markets which have become more responsive to social media messages by senior figures, particularly in the new US administration.

With trading becoming more reactive, firms are increasingly aware of liquidity in global bond markets which was brought to the fore by the spike in UK gilt yields in late 2022 and more recently volatility in the French bond market after French president announced a snap election in mid-2024.

The panel of experts will discuss the European liquidity picture with an increasing focus on individual country’s sovereign debt, which has been seen to be generally good but can become challenged in times of market stress.

A lot is made of the fragmentation of the European fixed income market but what does this actually mean for firms trading into this market? The fragmentation issue is compounded by the emergence of the European Short-Term Rate (ESTR) market, based on the European risk-free rate.

This has developed in the past couple of years as an alternative to the established Euribor market but different use-cases have emerged for the two markets which look likely to exist in parallel, at least for the foreseeable future.

The trend seems to be that bank desks are using ESTR in the front-end for Overnight Index Swaps (OIS) and around European Central Bank rates decisions whereas Euribor remains the preferred rate for longer-dated swaps.

ESTR and Euribor are also a key component of Eurex’s initiative to become the Home of the Euro Yield Curve, covering ESTR, Euribor, the longer-dated Bund, Bobl and Schatz contracts, interest rate swaps and Euro repo, cleared through Eurex Clearing.

The panellists will discuss the liquidity provided by the current range of European fixed income products and the role that vibrant EU bond and EU bond futures markets will play in the evolution of the European fixed income industry.

To find out more about the Eurex Derivatives Forum Event, please visit the Homepage you can find the agenda here.