RUSSIA: Kremlin-No Plan For Putin-Trump Call In Coming Days

Not just EUR spot markets that are gaining well early Wednesday, with front-end EUR implied vols surging on today's rally, putting the one-week clear of 11 points. This is still shy of the year's best levels (triggered by early February tariff volatility and Trump's inauguration), but holds 2.5 points clear of the YTD average as markets rush to price in near-term vol and the prospect of a higher EUR.

• Topside demand is clear to see: 1m EUR/USD risk reversals are now broadly flat, erasing the put premium that had dominated the market since late September and accompanied the USD Index rally off September lows. As a result, the rush of EUR/USD parity options pricing that became a notable market theme at the turn of the year has all but concluded, with markets now pricing just 0.3% options-implied probability of a touch of 1.00 by end-Q1, having traded as high as 28% just a month ago.
• No surprise then to see upside EUR/USD structures in firm demand today: over €11.5bln in calls have crossed the DTCC just this morning (that's near €3 in calls for every €1 in puts), with over €1bln call notional crossing at both the 1.08 and 1.10 strikes, making for some of the firmest upside EUR demand of the year so far.

• A decent 5-year gilt auction with with low price broadly in line with the pre-auction market mid-price with a solid average price and 0.3bp tail - a smaller tail than a month ago and a higher bid-to-cover of 3.39x (3.05x prior).
• After a brief dip just ahead of the auction results being published, the 4.375% Mar-30 gilt is now trading between the LAP (lowest accepted price) and the average auction price.
• Gilt futures also saw a dip just before the auction results (but after the bidding window closed) but are now broadly in line with pre-auction levels.