Hedge funds pile into euro systematic vol selling

Range-bound rates markets in Europe entice hedge funds to sell short-dated straddle positions

As a degree of certainty starts to emerge regarding the path of interest rates in Europe, dealers say hedge funds are increasingly willing to systematically sell rates volatility to take advantage of range-bound markets.

Coming into the year, euro rates markets expected a series of cuts from the European Central Bank, but these only materialised on June 6 when the central bank lowered its policy rate by 25 basis points to 3.75%. Since then, two-year rates have remained between 3.4% and 3.05% and