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To start an exchange of ideas, what do you think of the 50y eur swap at -0.58%?

At this moment, the carry for paying 50y fixed is positive and the low liquidity of long tenors is shaping the curve in a way we have never seen before. This is the shape of the eur swap curve today.

enter image description here

David Duarte
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  • I have been out of the market for a few months now, but how was the swap curve last week before all hell broke loose? Could be institutional long dated hedging (pension funds, insurance firms etc) –  Mar 12 '20 at 12:38
  • It's a very interesting question but maybe better suited for the meta stack? – Quantuple Mar 12 '20 at 17:54
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    It’s a bit too open ended for this site but these are exceptional times so please feel to discuss. – Bob Jansen Mar 12 '20 at 20:02
  • The absolute level is typical classic but the shape itself is nothing new. – Lliane Mar 13 '20 at 07:09
  • Methinks if I could actually interact with that curve, locking in the 20y20y fwd rate for my kids to buy Dublin and Amsterdam real estate after uni looks good. And those DEDZ flat-forever dividends should be worth a higher multiple. Assuming the curve is a genuine "thing" and not an acturial residual ;-) – demully Mar 13 '20 at 08:59
  • This looks more like a forward curve and not a par swap curve. You can see current par swap rates at https://sebgroup.com/large-corporates-and-institutions/prospectuses-and-downloads/rates/swap-rates and rates are nothing that the chart depicted – Attack68 Mar 16 '20 at 21:47

2 Answers2

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The long end of swap curves are often inverted due to convexity. For example, if 30s/50s were flat , there would be ‘free’ convexity to be had by receiving 50s and paying 30s. Hence, 50yr swap rates are lower than 30yr rates to offset the value of this convexity.

dm63
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To add a bit more color, the 2s50s were only close to this level in 2008 when the ECB hiked against all market expectations

enter image description here

David Duarte
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