Fixed Income Futures – September roll analysis

Stable activity with the minimum exchange day rule in place

The roll into the December expiry was smooth, without any hiccups. The minimum exchange day rule ensured that no front month CTD switches occurred, supporting an orderly roll with ATM Bund implied volatility remaining range-bound between the 8% and 9% mark.

Open interest dropped significantly after the roll period to slightly below 5 million contracts, possibly due to less speculative trading at the back of the minimum exchange day rule and lower hedging requirements as new CTD bonds for Bobl and Schatz have higher duration and coupon levels.

The September 2023 roll to December expiry saw similar activity compared to the June 2023 roll, with most products seeing an acceleration six days before expiry. In the German segment, Bund (FGBL), Bobl (FGBM), Schatz (FGBS) and Buxl (FGBX) roll activity was slightly lower compared to the June 2023 roll. This was more prominent in Bobl and Buxl, where activity rose a day later compared to the last roll. For BTP futures (FBTP), the increase in rolled open interest was steeper in the last four days before expiry compared to June 2023. OAT futures (FOAT) roll activity accelerated six days prior to expiry compared to the June 2023 expiry, where roll activity began as early as ten days before the last trading day.

For December 2023 expiries, within the core German segment, the CTD bond changed in Bobl and Schatz futures, while in the European segment, a CTD switch occurred in all except for OAT futures. Contract duration decreased across all CTDs except for Bobl and Schatz.

Trading volumes during the roll period (last ten days before expiry)

In addition to rolling contracts, we saw increased activity in the outright markets. Aggregated trading volumes across expiries during the roll days decreased -6.8% YoY for all contracts combined. The highest trading volume increase was observed in the BTP futures with +12.7% YoY.

In terms of deliveries, Buxl, Bund, Bobl and Schatz futures all saw an increase in the number of contracts delivered. Bund and Bobl futures saw a significant increase in physical delivery at +226% and +383%, respectively. Buxl and Schatz increased their physical delivery to 11.6k and 57k, up from 8.6k and 57k, respectively, compared to June 2023 roll. The deliveries for short-term and long-term BTP decreased significantly by -55% and -93%, respectively. OAT futures delivered 15.9k contracts in Q3/23, down from 22.9k in Q2/23. For more information on the delivery, please see here.

Calendar Spreads narrowed throughout the roll period

Calendar spread prices of Bund, Schatz, and OAT futures decreased over the roll period, with OAT futures having the biggest decrease of 7bps. Buxl, Bobl and BTP increased in price during the roll, with Bobl up by 4bps.

In the German products, Buxl and Bobl calendar spreads narrowed before increasing towards the end of the roll, ranging 12bps from the beginning of the roll. Bund and Schatz futures experienced the opposite, with calendar spread prices increasing before decreasing by the end of the period, with Bund futures decreasing even more by 6bps compared to 5.5bps in Schatz. In the periphery, Long Term BTP saw a 1bp increase, while OAT futures decreased by 7bps over the roll.