Options on euro swap rates are rising as the cheapest level in a year lure investors to guard against developing political risks in Europe. The normalized implied volatility for options expiring in three months on ten-year euro interest-rate swaps, known as 3m10y swaptions, hit a one-year low of 55 basis points on April 15. Besides the looming Brexit risks, Spain will be bracing for another election if lawmakers fail to agree to form a government by May 2, while Italian municipal elections in June will test Prime Minister Matteo Renzi’s popularity.

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