As of October 17, Eurex offers market participants the opportunity to hedge the market for euro-denominated high-yield corporate bonds in Europe.
In recent months, this segment has experienced increased volatility – mainly due to rising inflation, higher interest rates and differing market sentiment.
According to Eurex, financing conditions for corporate issuers have become less favorable, leading to widening credit spreads for euro-denominated corporate bonds.
“Volatility and a higher perceived risk for the future have increased the need for hedging by market participants investing in this asset class.”
The new Eurex High Yield Index Futures will be based on the Bloomberg Liquidity Screened Euro High Yield Bond Index and will use established benchmarks that Eurex clients are already familiar with.
Eurex explained that these standardized, exchange-traded contracts use a simple derivative structure widely used in the stock index futures market. The versatility of these futures allows investors to take long or short positions.
Clients have the option of either hedging Euro High Yield corporate bonds held in their investments or alternatively gaining additional exposure via an index linked product broadly reflecting this market.
The new contracts will also allow market participants to adjust their investment and trading strategies to take advantage of the increased volatility of euro-denominated sub-investment grade securities.
“Volatility and a higher perceived risk to the future have increased the hedging needs of market participants investing in this asset class,” said Lee Bartholomew, head of FIC ETD product design at Eurex.
“That’s why we designed a cost-effective and centrally cleared tool that enables our clients to manage their investments efficiently and thus also helps to maintain liquidity in this challenging environment.”
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