Eurex Strengthens European Bond Market with New Product

Eurex Exchange is looking to make a larger splash with exchange-traded fund (ETF) derivatives with a new product. The international exchange has previously been at the vanguard of the industry in terms of ETF products and innovation.

Its new product will aim to support the financial industry in hedging their portfolios. This includes the first to launch EUR-denominated fixed income ETF options today.

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Brett Olson, Head of iShares Fixed Income ETFs (EMEA) at BlackRock, noted: “We are seeing a virtuous cycle of demand for European bond ETFs developing as more investors become comfortable with the breadth and depth of liquidity in the market, and these options represent another critical milestone.”

As such, Eurex is looking to bolster two underlying ETFs. This includes some of the largest corporate bond ETFs in Europe – iShares EUR High Yield Corporate Bond ETF (IHYG LN) and iShares Core EUR Corporate Bond ETF (IEAC LN).

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Strong client demand for new products

The offering is important for investors given these products can improve optionality to hedge or gain exposure across European investment grade and high yield credit indexes. The products are the result of strong demand for clients amongst what is a bourgeoning institutional investor base both in Europe.

“It is the first time that investors will have access to options on Euro investment grade and high yield ETFs worldwide which provide access to a new tool that is more representative of cash bond markets for hedging risks and taking tactical positions,” explained Mr. Olson.

The decision to augment its offering represents Eurex’s emphasis on the corporate bond market. This is a segment that has seen a strong level of growth over the past decade since the global financial crisis and has steadily gained in popularity.

Previously, Eurex had listed USD fixed income ETF options back 2017. Since then, volumes have continued to grow in subsequent years, giving rise to the push for more EUR-denominated products.

“We are excited by this product launch as we feel that this is an ever-growing, important segment which we are committed to developing at Eurex. We believe we are well positioned to do this, giving clients access to a developing liquidity pool and offering a listed alternative that replicates OTC risk profiles,” reiterated Lee Bartholomew, Head of Fixed Income ETD Product Design at Eurex.