While funding rates are the main driver for many Eurex futures rolls, the Bund and Shats calendar spreads are different. Their performance is primarily determined by the evolution of the cheapest-to-deliver (CTD) yield curve and relative value dynamics, making them directional to yields.

Asset managers, who typically avoid delivery, have accumulated unprecedented net long positions in the WN futures sector. This concentration, a shift from shorter-duration sectors, is expected to unusually pressure WN calendar spreads as these positions are rolled early.

With the European Central Bank firmly on hold, a low-volatility regime is expected to persist. However, the options market is not fully pricing in the potential for directional curve movements, such as steepening or flattening. This creates opportunities to express curve views through options where the risk is undervalued.

Even if the Fed holds rates steady, front-end Treasury yields are unlikely to rise. Persistent uncertainty in labor market data, combined with the political prospect of a dovish new Fed Chair, will keep an easing premium priced into the market, anchoring short-term yields.

The Estet-Sofar basis is in a "tug of war." Diverging rate policies, where the market prices Fed cuts against a European Central Bank on hold, support a wider basis. However, the Fed's accommodating balance sheet policy (T-bill purchases) relative to the ECB's supports a narrower basis. This results in an expectation for the basis to remain in a tight range, albeit with a slight widening bias.

German swap spread movements are being driven more by technical factors than macro fundamentals. A primary driver is the unwinding of long-end interest rate hedges by Dutch pension funds. This flow is causing significant steepening in the 10-30 year swap curve and is expected to continue.

The European Central Bank's stable, "on hold" position has created a low-volatility environment for European rates. This policy predictability supports specific trading strategies, such as tactical range trading, using call spreads instead of outright long duration, and shorting gamma to capitalize on the expectation of continued low delivered volatility.

Asset managers tend to roll their futures positions early to avoid the complexities of the physical delivery period. This concentrated activity creates predictable market pressure. In sectors where these managers are net long, their early rolling can exert a bearish influence on calendar spreads.

Despite market focus on potential changes to the ECB's repo and swap lines, such as extending their duration and size, analysts expect minimal market impact. This is because borrowing at these liquidity facilities has been very low, currently at zero, diminishing the real-world effect of any extensions.