The 2020 Outlook for Euro Interest Rate Volatility
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The average implied volatility in Euro rates has ended up higher overall this year following the collapse in yields.
Buying volatility at the long-end would have returned well in 2019 as the high level of policy uncertainty and weak growth led to a sharp bull-flattening of the yield curve. The first half of next year may see short-volatility strategies in favor at the long-end, if rates remain in a broad range in the case of no material shift in the outlook. The ECB’s review of monetary policy instruments may be a source of volatility.