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Inter-Product Spreads

Inter-Product Spreads

Spread trading the term structure

On 16 September 2019, Eurex launched Inter-Product Spreads for fixed income futures as a standardized futures product.

Inter-Product Spreads are strategies used to create exposure to changes in flatness and steepness of the yield curve, such as a Bund-Buxl spread or outright spreads between European government bond futures such as the BTP-Bund spread.

By standardizing these spreads into a dedicated order book, Eurex creates a delta neutral trading opportunity by using the appropriate leg ratios. As the spread is traded in a single transaction, it also eliminates legging risk and saves bid-ask spread costs. Once the Inter-Product Spread is processed, the spread is divided into its individual legs which can be traded out in their respective order books.

DekaBank on the use of Inter-Product Spreads

Interview with Arndt Fassbender, Salestrader ETD at DekaBank on the recently launched Inter-Product Spreads.
Read about the main drivers behind trading Eurex Inter-Product Spreads and its benefits. Arndt also explains what strategies investors deploy to take advantage of market opportunities from spread trading in futures.

At a glance

  • Direct exposure to flatness, steepness of the yield curve or sovereign yield spreads
  • No legging risk
  • Bid-ask spread savings
  • One-click trading
  • Dedicated public order book
  • Individual legs are fully fungible in their respective products
  • Standardized STP process

Products and leg ratios

The following combinations are available as Inter-Product Spreads:

Spread StrategyInstrument NameDV01 neutral leg ratio IPS ratio of leg instruments
Bund-Buxl SpreadIPLX2.675:2
Long-term BTP-Bund SpreadIPPL1.393:2
Schatz-Short-term BTP SpreadIPS21.121:1

The above IPS leg ratios are valid for the March 2020 expiry. Final ratios will always be confirmed before each new expiry starts trading.

Vendor codes for Eurex IPS markets for fixed income futures

Investors can now follow the pricing and trading in Inter-Product Spreads (IPS) that were recently launched for select combinations of European fixed income futures at Eurex. IPS allow investors to trade the spread between different European government bond futures, and are initially available for the Bund-Buxl Spread, Long-term BTP-Bund Spread and Schatz-Short-term BTP Spread. More IPS combinations are planned to follow to complete the range of term structure and inter-market spreads available at Eurex. The vendor codes for the new IPS at Eurex are:


Product IDBloomberg CodeRefinity RIC
IPLXRXUB Comdty0#FGBL-FGBX-:
IPPLIKRX Comdty0#FBTP-FGBL-:
IPS2DUBTS Comdty

0#FGBS-FBTS-:


Contacts

Eurex Sales

Vassily Pascalis

T +44-20-78 62-72 11

vassily.pascalis@eurexchange.com

Fixed Income ETD Product Design 

Rex Jones

T +49-69-211-178 06

 

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