TREE NEWS reports: Barclays strategists Amrut Nashikkar and Eveline Dong said swaption trading volumes have fallen sharply over the past few weeks, while overall flows are skewed slightly long volatility, driven mainly by buying in long-dated tenors. The note flags a quieter rates-hedging market with a modest bullish tilt on volatility.
Barclays: Swaption Volumes Drop, Flows Slightly Long Volatility
The signal here is the mismatch between thinning liquidity and a tilt toward owning volatility, concentrated in long-dated tenors. That combination matters because it suggests positioning is being built for rate uncertainty rather than for carry, even as fewer participants are trading. Long-dated swaption demand is where hedging interest and relative-value bets overlap most, so it is the cleaner read on sentiment. Whether the long-vol skew persists if volumes stay subdued, or fades as the market thins further, is the open question.
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