Contrary to historical norms where Eurex futures lack delivery option value, the German Buxl (30-year) future currently presents some. This is driven by potential Cheapest-to-Deliver (CTD) switches, particularly to a lower coupon bond in a sell-off, creating an asymmetric upside risk for the delivery option's value.
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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.
With both the Federal Reserve and European Central Bank expected to remain on hold, forward financing rates are stable. This removes central bank policy as a key driver for the upcoming bond futures roll, elevating the importance of technical factors like investor positioning and repo market specifics.
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.
While the Swedish market prices in an extended "on hold" policy from the Riksbank, a downside risk premium could build in the curve. This creates an asymmetric opportunity in long duration positions targeting mid-2026, where the possibility of hikes is negligible but the potential for lower yields offers attractive upside.
Global diversification away from the US dollar, accelerated by geopolitical tensions, is creating structural demand for Eurozone Government Bonds (EGBs). This acts as a buffer, making Euro area term premia less reactive to global rate sell-offs in markets like the US and Japan, a trend expected to continue.
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.
Germany's finance agency signaled it would adjust debt issuance in response to a steepening yield curve. This sensitivity acts as a structural anchor on intermediate-term yields, creating a potential outperformance opportunity for German bonds versus US and UK debt, which face greater fiscal pressures.
Lacking official CFTC-style data, analysts estimate Eurex futures positioning using open interest and price changes. This proprietary analysis reveals significant long positions in Italian BTP and German Schatz futures, corroborating client survey data that shows the European carry trade is a popular theme.
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.