Eonia jump forces rethink of euro swap pricing
Traders say volatility of discount rate should be taken into account after "unprecedented" 12bp move
Traders say the pricing of euro interest rate swaps might need to change after an “unprecedented” jump in the overnight unsecured lending rate exposed the fragility of one of the key inputs.
The euro overnight index average (Eonia) fixing moved 33% higher over two days last week, leaping from –36 basis points on November 28 to –24bp on November 30. Rates strategists have blamed the move on extra lending linked to a sovereign debt swap in Greece, or an accounting change by a US bank. Eonia fell
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