As per last weekly reporting, European high yield funds registered an outflow of €771mm (1.3% of AUM) for the week ending 22 November.
There was a €143mm (2.1% of AUM) net outflow for ETFs and a €53mm (0.6% of AUM) net outflow for short duration funds.
Last week’s fund outflow of €806mm (1.3% of AUM) is revised to an outflow of €829mm (1.4% of AUM).
Let’s now move onto the core area, EUR longs are within 4% of their three-year highs. Meanwhile, the 10- year Treasury/Bund spread remains within a whisker of 200bp, a level it broke through a year ago for the first time since 1989.
These are the two obstacles euro bulls need to get through and even if the euro continues to unwind undervaluation with the help of strong economic data and now, optimism that a coalition government can be formed in Germany, it will inevitably be heavy going.
Long positions in EUR bottom-right vega benefit from a positive vol rolldown (refer above graph). They are hence attractive as strategic vol longs.
For instance, the vol rolldown finances roughly 15% of theta in a long 7y30y straddle position and almost 60% of theta in a long 15y30y, making the overall roll down much less penalizing than for the 5y5y benchmark point (refer above graphs).
For the 7y30y, theta cost is completely financed if the 7y30y vol increases in one year’s time by 4.5bp/y (i.e. 0.28bp/d), i.e. moves back to levels seen in 1H’2017. The corresponding breakeven move for the 15y30y vol is only 1.7bp/y (0.11bp/d). Courtesy: SG


Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes
China's Refining Industry Faces Major Shakeup Amid Challenges
Morgan Stanley Warns Against Overestimating EV Demand Boost from Rising Oil Prices
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty
European Stocks Rally on Chinese Growth and Mining Merger Speculation
Why the future of marijuana legalization remains hazy despite high public support
Global Markets React to Strong U.S. Jobs Data and Rising Yields
Wall Street Analysts Weigh in on Latest NFP Data
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts
Bank of America Posts Strong Q4 2024 Results, Shares Rise
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 



