Ugly, Messy, Lopsided: Inventory Cutting Could Impact SX5E June Futures Roll

Increasing moves by delta one desks to cut inventory and buy back synthetics is pushing equity repo rates lower in the Eurostoxx 50 (SX5E) with the Eurostoxx 1-yr total-return swap at its highest point during the last five years, according to some equity derivatives salesmen. Given the trend, combined with the lack of supply seen from investors in front-end futures, rolling could be challenging for investors as the sellside would be less willing to provide liquidity during the futures roll. Despite the concerns, market participants are yet to see investors moving early in rolling futures positions.