Market Movements, Volatility, and Trends Evaluation

Every week, we provide you with a forecast of the financial markets leading products

Based on advanced statistical models. We scrutinize the bond market, studying yields, spreads and volatility to anticipate future movements. In addition, we examine trends and volatility in the foreign exchange market, with a particular focus on the EURUSD parity, and finally, we take a look at equity indices, with a particular focus on the US S&P 500 stock index, with a brief overview of its options market.
With all these anticipations, our aim is to provide you with a more informed view of future market movements.

Update : 2026-10-05 - 4:35 am GMT
Memento
USUS Bond Market
UST yield curve

Forward money-market rates interrupt their recent rise this week. The 2-year SOFR OIS eases, while its spread over overnight funding narrows slightly. The market is therefore scaling back some of the future tightening it was still pricing in last week. The forward SOFR curve nevertheless remains steeply upward-sloping across its front maturities and continues to imply monetary conditions materially tighter than those prevailing today.

Over the week as a whole, the UST curve steepens further, but the nature of the move changes markedly. The shortest maturities rally, while yields rise from the 5-year sector onward, with the increase becoming progressively larger further out the curve. Unlike last week, this is no longer primarily a broad upward shift in yields, but a genuine twist between the front end and duration.
The 2-year to 10-year segment accounts for most of the steepening. The 2-year yield declines slightly while the 10-year continues to rise. The 3-month bill rallies even more, adding a modest steepening at the very front of the curve. The relative resilience of the 5-year seen last week also disappears, with its yield moving higher again and its position in the middle of the curve becoming much more neutral.
The long end extends the move without amplifying it to the same degree. The 30-year yield rises slightly more than the 10-year, producing some additional steepening, although the move remains moderate. The main deformation of the curve therefore continues to lie between the front end and the 5- to 10-year sector.

The OIS remains below the 2-year Treasury yield and the spread between the two widens slightly. Part of this widening reflects the rebound in short-term inflation compensation, which limits the decline in the nominal 2-year yield compared with the fall in the OIS.

Overnight secured funding remains broadly orderly, although some divergence is emerging across its different segments. BGCR and SOFR both ease slightly over the week, while GC funding through DTCC edges higher. Its spread over SOFR, which was close to zero last week, has widened to several basis points, while its spread over BGCR has also increased. The rise in funding costs is therefore concentrated in this part of the repo market rather than being generalized across secured funding. At the same time, dispersion within the transactions underlying BGCR remains very low and volumes stay close to their recent average. This combination does not point to a shortage of dollar liquidity, but it does suggest that some collateralized funding transactions have become relatively more expensive.
Fails remain an important point of attention. Their increase accelerated sharply during September, before quarter-end, and the daily data show another peak around September 30, followed by only a partial pullback with no clear return to earlier levels. The phenomenon therefore cannot be reduced to a simple quarter-end effect and points to persistent settlement difficulties. At the same time, the deterioration in the EURUSD cross-currency basis and the rise in bank risk premia in Europe, particularly in France, raise the possibility that some of these frictions are linked to balance-sheet constraints, dollar access or collateral availability among certain European intermediaries. The divergence from yen-related funding spreads shows that the phenomenon is not uniform across international markets. To be continued...

Inflation adds an important distinction this week. The rise in inflation compensation remains concentrated at shorter maturities, while 10-year and 30-year inflation swaps ease slightly and long-dated forwards remain well anchored. The market is therefore not validating a new broad-based inflation wave, but rather persistent near-term price pressures.
The steepening of the Treasury curve is being driven primarily by real yields. The synthetic 2-year real yield declines, while real yields rise from 5 to 30 years, with the increase becoming more pronounced at longer maturities. The widening of the 2-year versus 10-year slope therefore reflects a higher real return required to hold duration, while inflation compensation is, by contrast, acting to moderate the steepening.

This week’s configuration shifts the market’s center of gravity toward real yields. Their rise across intermediate and long maturities increases the cost of duration, but at the same time raises the compensation available to new buyers, in an environment where domestic repo funding remains liquid and long-term inflation expectations remain contained. This leads to the fundamental question: U.S. duration, a term-premium problem or a reflection of stronger growth?

As of today, SOFR futures and the Bills do not price in a rate hike at the October meeting. This corresponds to a cumulative increase of around 25 basis points by the end of December 2026.

US bond volatilityUS bond volatility

Over the week, US vs. Germany short-term volatility (AB HV) spreads narrowed across the curve, with a more pronounced adjustment at the short end. US volatility has converged toward German volatility at the short end, while remaining higher across the rest of the curve.
For long-term volatility (AB HV), stability remains the dominant feature. US vs. Germany spreads are virtually unchanged across the curve, with only a minor narrowing at the long end. US volatility remains higher than German volatility.
Compared with the other European markets, US short-term AB HV now stands below France across a broad part of the curve and remains below Italy. Over the long term, US volatility remains higher than that of all the European markets included, with the widest gaps still observed versus Germany.

Volatility (AB HV) Trend Historical level Risk of violent variation Move Index (IV) HV - Move Index (IV)
Long-term Medium Medium
Short-term Standard
Volatilité des Treasuries US

Long-term volatility (AB HV) was almost unchanged over the week. It rose by around 10 bps from the 2Y to the 10Y, while the 30Y was virtually flat. The longer-term risk picture therefore changed very little. By contrast, the gap between short-term and long-term volatility widened by 50 to 60 bps across the curve. This mainly points to higher near-term risk, without any meaningful change in the underlying longer-term risk level.
Short-term volatility (AB HV) increased across the entire curve, by around 60 bps on the 2Y, 70 bps on the 5Y and 10Y, and 50 bps on the 30Y. The increase was therefore slightly more pronounced in the intermediate maturities. The curve retained a bell-shaped profile, with volatility highest around the 5Y and then declining toward the 30Y. Recent risk therefore remains more concentrated in the intermediate part of the curve.

Last week, we were too quick to declare the risk window closed: the renewed rise in IV contradicted our view that conditions were normalising after the central bank meetings. Its recent pullback points to an initial easing in the premium paid for protection, but the rise in Analysebourses’ MOVE HV shows that the turbulence has taken hold in the cash market. Concern appears to have peaked, but the spell of volatility is not over yet.

European UnionEuropean bond market
European curve yield

European money market rates are easing this week, even as the gradual withdrawal of excess liquidity continues. €STR is now trading around 6 bp below the deposit facility rate, a narrowing that reflects less abundant liquidity in the banking system. At the same time, the 2-year euro OIS has fallen from 3.25 % to 3.04 %, while €STR futures still price close to 25 bp of tightening between October and December 2026, followed by further rate increases through mid-2027 before stabilising from the summer onward. Euribor futures confirm this trajectory. The market therefore continues to price further ECB tightening over the coming months, but along a lower overall rate path than a week ago.

Following on from last week, the main change is that the European move is no longer shared across all sovereign issuers. The previous week had been dominated by relatively uniform steepening between the 2-year and 10-year maturities, with the 10-year yield rising faster than the front end.
This week, that coherence has disappeared. The Bund is following the easing in the risk-free rate, while the OAT is moving in the opposite direction. Italy remains in an intermediate position and Spain continues to show greater stability. The turbulence in European bond markets therefore reflects neither a uniform rise in yields nor a broad resurgence of peripheral risk. It is concentrated primarily on the French sovereign.
Our financial risk indicator confirms this concentration of risk. The French component has reached 4.09, far above Germany at 0.90, Italy at 0.32 and Spain at 0.21. The aggregate European indicator has risen to 1.38, with France accounting for most of that increase.

Germany provides the clearest example this week of how monetary easing is being transmitted into sovereign yields. Bund yields have fallen across the curve, by almost 20 bp at 2 years, 17 bp at 5 years, 13 bp at 10 years and 9 bp at 30 years. The decline therefore becomes progressively smaller as maturity extends.
The German curve continues to steepen between 2 and 10 years, but for a different reason than last week. This time, the move is not being driven by the 10-year yield rising faster. Instead, the 2-year yield is falling much more sharply than the rest of the curve.
The 2-year Bund is tracking the decline in the 2-year OIS almost exactly. Its spread over the swap rate remains close to 4 bp. Germany therefore remains almost directly anchored to the euro area's risk-free benchmark. This behaviour also reinforces the Bund's role as both a hedging instrument and preferred collateral during this week's turbulence.

France presents a completely different configuration. The 2-year OAT yield has risen by 16 bp, the 5-year by almost 25 bp, the 10-year by 17 bp and the 30-year by 16 bp. The French curve has barely steepened between 2 and 10 years. Instead, it has shifted higher overall, with a particularly pronounced dislocation in the 5-year sector.
The behaviour of the 2-year maturity already provides an important signal. While the OIS has fallen by more than 20 bp and the 2-year Bund has almost fully followed that decline, the 2-year OAT has moved in the opposite direction. The OAT-OIS spread has therefore widened from around 33 bp to almost 70 bp.
This spread should not be interpreted as a pure credit spread. Its evolution nevertheless shows that the easing in the common monetary factor is no longer being transmitted normally to French government debt. An additional premium is now appearing even at short maturities.

The belly of the French curve has become the most revealing segment. The 5-year OAT vs. Bund spread has widened from around 67 bp to 108 bp in a single week, an increase of more than 40 bp. The move is larger than that seen at 2 years, 10 years or 30 years.
The contrast with last week is particularly important. The French 5-year segment had still been an area of relative resilience, with the Franco-German spread virtually unchanged. That resilience has now disappeared completely. The 5-year sector has instead become the core of the OAT's underperformance.
Yields do not allow us to observe flows directly, but the market signal points to a clear preference for the Bund, while the OAT must offer a concession to compensate for sovereign risk, liquidity and the future volume of issuance. The pressure is no longer confined to long duration. It has moved into the centre of the French curve itself.

The comparison between France and Italy reinforces this conclusion. The 2-year BTP yield is almost unchanged over the week, while the 5-year has risen by nearly 9 bp, the 10-year by 7 bp and the 30-year by around 5 bp. The Italian curve is therefore steepening between 2 and 10 years, without anything comparable to the move seen in the OAT.
The 2-year BTP spread over OIS has risen to around 48 bp. Italy is therefore not benefiting fully from the easing in the risk-free rate, but its behaviour remains very different from that of France because its 2-year yield is almost unchanged.
The direct comparison is even more revealing in the 5-year sector. The OAT now yields around 28 bp more than the BTP, compared with only 12 bp a week earlier. At 10 years, the France-Italy spread has widened from around 15 bp to 26 bp. The market therefore continues to demand a higher yield to hold French debt than Italian debt, and that difference has increased sharply this week across intermediate maturities.

Spain confirms that this pressure does not represent a broad peripheral move. Its 2-year yield has fallen by almost 7 bp, the 5-year has edged lower, while the 10-year and 30-year yields have risen by only 1 to 3 bp.
Its 2-year spread over OIS remains close to 24 bp, well below French and Italian levels. Spain's resilience, together with Italy's relative stability, isolates the French move even further. The market is not indiscriminately reducing exposure to euro-area sovereign debt. Instead, it is establishing a much clearer hierarchy between individual issuers.

The long end of the curve helps distinguish the behaviour of duration. In Germany, 10-year and 30-year yields have fallen by around 13 and 9 bp respectively. The move points to demand for Bund duration, stronger at 10 years than at the ultra-long end. The 30-year segment retains a larger term premium.
In France, the move is the opposite. The 10-year and 30-year yields have risen by around 17 and 16 bp respectively. There is therefore no rush into French duration. The fact that the 30-year yield has risen slightly less than the 10-year points to some resilience at the ultra-long end, probably supported by structural investors with long-duration liabilities, but that demand remains insufficient to drive yields lower.
The OAT vs. Bund spread has therefore widened by around 31 bp at 10 years and 25 bp at 30 years. Italy remains much more stable, with the 10-year BTP yield rising by around 7 bp and the 30-year by 5 bp. Spain has been more resilient still. European duration is therefore not being sold across the board. The relative deterioration is concentrated primarily in French government debt.

Inflation expectations help identify the nature of this rise in yields. Over the past twenty sessions, the pressure on French yields has not been accompanied by a comparable increase in inflation swaps. These have generally declined, while synthetic real yields have risen sharply.
At 10 years, French implied inflation stands around 2.06 %, compared with approximately 2.57 % in Germany, while the OAT yields around 4.87 % and the Bund around 3.47 %. The synthetic real yield therefore stands near 2.81 % in France compared with only 0.90 % in Germany.
The Franco-German yield gap therefore does not stem from higher expected inflation in France. It is driven primarily by a much higher real yield, alongside the term premium and the premium attached to the significantly weakened French sovereign signature.
At 30 years, the picture is different. French and Italian synthetic real yields are virtually identical, close to 3 %. The French nominal yield remains around 28 bp above the Italian yield, but French implied inflation is also approximately 31 bp higher. The entire OAT vs. BTP spread at the ultra-long end therefore cannot be interpreted as an additional French risk premium.
The pressure specific to France is much clearer at 2 years, 5 years and 10 years than in the real-yield comparison at 30 years.

This week therefore marks a more pronounced deterioration in the French sovereign signature than the previous one. The move is no longer confined to the higher compensation required for long duration. The concession now appears from the 2-year maturity onward and reaches its maximum at 5 years, even as OIS rates decline and the Bund follows that easing.
Germany is fully reasserting its role as the anchor around the risk-free rate. Spain retains a relatively solid structure. Italy is absorbing a moderate rise in intermediate and long-term yields. France, by contrast, is clearly moving away from the common trend.
The OAT now yields more than the BTP across the entire curve, and the gap has widened further this week, particularly across short and intermediate maturities. The market is not rejecting French debt, but it is demanding a much larger concession to attract capital.
The most concerning signal is that this concession has now appeared from the 2-year maturity onward and, above all, at the heart of the curve in the 5-year sector, precisely where the easing in the risk-free rate should have provided greater support. Political risk, liquidity, the relative quality of collateral and the market's capacity to absorb future French issuance are now playing a much larger role in the formation of French yields.

As of today, Euribor and €STR futures do not price in a rate hike at the October meeting. This corresponds to a cumulative increase of around 25 basis points by the end of December 2026.

You will find details of the various components of European bonds below and more in the Interest Rates section.

EU bond volatilityEuropean bond volatility
Volatilité des Treasuries US

Long-term volatility (AB HV) in Europe remains broadly stable, with limited changes of +6 to +13 bps. The longer-term risk level has changed very little. Germany continues to show the lowest volatility, France remains in the middle, and Italy the highest. This ranking is unchanged this week.

  • GER. Short-term volatility (AB HV) increased by +130 bps on the 2-year, more than in France and Italy, followed by +110 bps on the 5-year, +90 bps on the 10-year and +80 bps on the 30-year. Despite this move, long-term HV changed very little. The increase remains mainly concentrated in short-term volatility.
  • FRA. Short-term volatility (AB HV) rose by +80 bps on the 2-year, +120 bps on the 5-year, +100 bps on the 10-year and +130 bps on the 30-year. The 30-year stands out with a larger increase than in Germany and Italy. Long-term HV changed little.
  • ITA. Short-term volatility (AB HV) is currently the highest of the three countries on the 2-year, 5-year and 10-year. Over the week, it increased by +50 to +100 bps depending on maturity, generally less than in Germany and France. Only the 30-year remains slightly below France. Long-term HV is almost unchanged, showing that the increase remains concentrated in short-term volatility.
European union flagEUR and USD crosses

USA flag

The dollar is extending its appreciation, but under a slightly different regime from previous weeks. Its gains remain broad-based while overall volatility is no longer accelerating, giving more weight to interest-rate differentials and flows into US assets than to a simple safe-haven bid. The Fed’s recent rate hike continues to support this backdrop, even though expectations for another immediate tightening move have eased.

  • In the Americas, the Mexican peso remains under pressure as the yield advantage that had been one of its main supports continues to erode. Banxico’s prolonged pause contrasts with the recent tightening in the United States, while Mexican growth remains modest. The carry is still attractive, but much less distinctive against the dollar. The Brazilian real, by contrast, continues to absorb dollar strength relatively well despite the easing cycle already underway. Fiscal concerns and the approaching election now represent the main risk of a more abrupt break. The Canadian dollar continues to suffer from a rate differential that has become less favorable against the United States. The recent decline in oil adds another headwind to a currency already penalized by the widening gap in North American yields. The weakness of the Chilean peso remains consistent with the difficulties already identified in the transmission of the mining sector into the domestic economy. Persistent problems at Codelco continue to limit copper’s ability to provide the currency with the support it would normally offer.
  • In Asia, the Chinese renminbi continues to escape part of the broader rise in the dollar, while the closure of Chinese markets for much of the week is likely to keep both price moves and volatility contained. This stability contrasts with the much stronger pressure affecting several energy-importing Asian currencies. The Korean won continues its recovery, with volatility falling sharply while the currency remains firm, gradually weakening the case that the move is merely a short-covering rebound after its earlier weakness. Semiconductor exports and support from the current account now provide a more solid fundamental base.
    USDJPY remains slightly biased in favor of the dollar, while volatility has eased markedly from the previous week. Money-market futures continue to price a gradual rise in Japanese interest rates, concentrated in the front end before becoming much more gradual further out. The normalization scenario therefore remains meaningful, but without any renewed acceleration this week, leaving the dollar with a short-term carry advantage.
    Alongside this rate signal, dollar/yen funding conditions have eased compared with the previous week, showing that the current firmness in the pair is not being driven by renewed broad-based stress in access to dollar funding. This factor nevertheless needs to be watched very closely, as the maturity structure remains highly irregular, with several large moves and rapid changes in sign. These dislocations point to hedging and balance-sheet needs concentrated in specific maturities, as shown by our funding stress map, and could quickly become an amplifying factor for the pair if the tensions were to spread across a broader range of maturities.
  • In Europe, the Polish zloty remains vulnerable to the deterioration in Poland’s fiscal perception that had already emerged the previous week. The sovereign downgrade and the lack of fresh monetary support are maintaining a domestic source of weakness in the zloty beyond the broader strength of the dollar. The Hungarian forint presents a more nuanced picture. The political shift and the plan to adopt the euro have improved perceptions of Hungary and supported the forint. In return, this improvement in credibility has led to lower domestic yields, reducing the carry advantage that had previously supported the currency. The Norwegian krone is also being hit by the recent reversal in oil prices, which is removing part of the support provided by Norges Bank’s latest tightening move.
  • In Oceania, the RBA remains one of the most restrictive central banks among developed economies, but the latest inflation release came in slightly below expectations and reduced the likelihood of another immediate rate hike. The Australian dollar is therefore losing part of the marginal support it had been receiving from the rate differential, while the Fed also maintains a restrictive stance. The New Zealand dollar remains supported by expectations of further RBNZ tightening, but this advantage is now being partly offset by political uncertainty ahead of the election and by the debate over another change to the central bank’s mandate.
  • In Africa, the South African rand is losing some of the relative support it had gained after the SARB’s tightening. The rise in global yields is now increasing the opportunity cost of emerging-market exposure enough to reduce the effectiveness of the South African carry, while the stronger dollar is reinforcing the move.

Overall dollar volatility (HV) remains on a broader downward trend. In the short term, however, it has rebounded from recent lows across a broad range of currencies. For now, this looks more like an exit from a low-volatility regime than the beginning of a genuine stress phase. The increase in tension remains contained and there is still no sign of a cumulative acceleration in volatility.
The USDJPY pair remains one to watch in the short term, with volatility (HV) showing signs of renewed tension.

EU flag The euro’s weakness is becoming more widespread than last week. It is not being accompanied by a surge in volatility, but rather by a loss of relative advantage against several currencies benefiting either from stronger carry or more supportive external fundamentals. The most important change is the emergence of significant moves in crosses that were still broadly balanced the previous week.

  • In the Americas, the Mexican peso has weakened enough as its carry advantage has eroded to allow the euro to gain ground despite its own broader weakness. The Brazilian real retains a much stronger advantage. Despite successive rate cuts by the Brazilian central bank, real interest rates remain high and continue to compensate investors for fiscal and electoral risk. The Chilean peso remains more dependent on domestic factors linked to the mining sector, preventing the currency from fully benefiting from its usual exposure to commodities. The move in the cross therefore continues to be driven more by Chilean weakness than by any euro-specific factor.
  • In Asia, the renminbi remains relatively resilient thanks to its managed exchange-rate regime. The divergence versus the euro is more pronounced than against the dollar, amplifying the move in the cross without any particular acceleration in Chinese currency volatility. The Korean won continues to recover on a more fundamental basis. Korean technology exports remain particularly strong, while the current account is providing support that was much less visible during the won’s previous period of weakness. Lower volatility also reinforces the more orderly nature of the recovery. The Malaysian ringgit retains a specific advantage within Asia thanks to Malaysia’s status as a net energy exporter, alongside continued support from the electronics sector. The Indonesian rupiah remains vulnerable because of higher energy costs and rising global yields. Its performance against the euro is therefore notable precisely because it is not based on any clear improvement in its own fundamentals. In this case, the cross mainly reflects the relative weakness of the single currency.
    The yen continues to benefit from expectations of higher Japanese interest rates, still concentrated in the front end of the money-market futures curve, but without any fresh acceleration. The decline in the cross has been accompanied by a sharp fall in volatility. Euro/yen funding conditions have also eased compared with the previous week. This move may reflect less a broad improvement in funding conditions than a reduction in euro hedging needs, consistent with Japanese investors reducing exposure to European bonds and repatriating capital into yen. The signal still needs to be confirmed by actual flow data, but the combination of a lower EURJPY and a "normalization" of the basis strengthens this hypothesis.
  • In Europe, the Swiss franc is once again playing a diversification and safe-haven role amid turbulence within the European bloc, even though the Swiss National Bank continues to run a much less restrictive policy than several of its peers. Sterling is benefiting from a more favorable monetary backdrop relative to the euro. Markets are still pricing further Bank of England rate hikes, while the prospect of closer institutional ties with the European Union is also providing additional support. The forint is in a more unusual position. Prospects of deeper European monetary integration and fiscal consolidation have improved its structural credibility, but the associated bond rally has compressed its yield advantage.
  • In Oceania, moves in the euro against the Australian and New Zealand dollars remain too limited this week to provide a sufficiently robust signal.
  • In Africa, the euro is gaining ground against the South African rand, but the main driver is the declining effectiveness of South Africa’s monetary support. Higher global yields are reducing the relative appeal of emerging-market assets and are partly offsetting the benefit of the SARB’s recent tightening.

Overall euro volatility (HV) remains in a broader easing trend, despite a slight increase over the week. The short-term component is rising more clearly, and this pickup is beginning to spread, mainly across Europe and Asia. By contrast, volatility is easing significantly in Africa, remains almost stable in the Americas, and is little changed in Oceania. At this stage, the pickup in HV does not point to the emergence of a sustained or broad-based regime.
The EURJPY and EURCHF are worth watching.

Europe flagEURUSD Pair

This week, the signal is becoming more bearish. EURUSD is moving lower and the US/EU rate differential is no longer simply favorable to the dollar, it is widening beyond the very front end. The front-end differential has increased by only around 2 bps, but its average level has risen by nearly 19 bps and its slope has shifted from -6 to +9 bps, significantly steepening the forward curve from 2027 onward.
The decline in spot remains the main driver of the fall in forwards. Further out the curve, however, the rate structure offsets part of this move. This does not change the broader signal, the rates market is still not validating a sustained euro recovery, while carry remains favorable to the dollar.
This rate signal is now being reinforced by a flow factor. Outflows from European bonds are adding pressure on the single currency, while the rise in the Swiss franc suggests that some capital is also seeking protection within Europe itself. The move is therefore no longer driven solely by the dollar’s relative advantage, it is also beginning to reflect a growing risk premium on Europe, which could put further pressure on the pair if these flows intensify.
The most notable change comes from dollar/euro funding conditions, with the basis moving from -2.68 to -6.87 in one week and deteriorating more sharply over the last two sessions. Unlike the previous week, funding conditions are tightening again, although they have not yet reached a critical level. This is likely to reinforce demand for dollars and reduce the ability of EURUSD rebounds to extend. The short-term setup therefore remains bearish: the rate differential has widened, the forward curve has steepened further, bond flows are becoming increasingly unfavorable to the euro, and dollar funding conditions are deteriorating. Until these factors normalize, EURUSD rallies are likely to remain technical rebounds rather than the start of a genuine reversal.

Implied volatility (IV) on the pair has risen sharply over the week, from 5.91% to 6.96%, after peaking at 8.09% on October 1. Historical volatility (HV), however, remains more contained and has not risen to the same extent. The gap between IV and HV is therefore widening, reflecting a higher cost of protection rather than an already established volatility regime. At this stage, the market is pricing in more risk, but HV is not yet confirming the emergence of a sustained or disorderly move.

WorldEquity Indices

This week, there has been little new information to change our view of the US equity market. Recent developments have mostly reinforced the trends already in place rather than introduced any meaningful new ones.

The expected easing across other segments of the US market should provide a more supportive environment for equities. At the same time, AI financing is entering a new phase. SoftBank has now followed through on its commitment to OpenAI after raising the necessary funds in the bond market. The cost of this debt shows just how financially demanding the competition has become, but it also shows that investors are still willing to provide the capital required.
The main confirmation this week has come from earnings. S&P 500 EPS expectations have been revised higher again. The market's advance is therefore not being driven solely by multiple expansion, as the expected improvement in earnings continues to provide fundamental support for equity prices.

We have also expanded our S&P 500 module by adding calculations for the P/E ratio, the index earnings yield and its spread versus the 10-year Treasury yield. This should make it easier to distinguish between gains driven by earnings growth and those coming from a simple re-rating of the market.

The overall setup for US equities therefore remains favorable. Liquidity conditions are stable, investment remains very strong, capital is still available and earnings expectations continue to rise. In this environment, we still do not see the conditions required to trigger a sustained downward spiral in US equities.

European equities are a different story. Beyond the lack of clear prospects, renewed tensions surrounding the harmonization of European financial markets are another reminder of how far Europe still has to go before achieving a genuine single capital market. This is now being compounded by the tensions created by the chaotic management of Emmanuel Macron's government in France, which are adding further pressure to the European banking sector, particularly French banks, as bank risk premia rise sharply.

Analysis of SP500 options and VIX contracts

The French Lunar Week

This week, we were deeply shocked by the events that unfolded in France.

The high school blockades had initially begun without violence. Emmanuel Macron and his government nevertheless saw fit to respond with force. What was bound to happen did happen, after several years marked by particularly serious cases of police violence. The Nahel case obviously remains fresh in everyone's memory. A young man from the suburbs was killed during a traffic stop, in a scene captured on video that immediately contradicted the initial version of events, and the officer responsible has since been reinstated in the police force. In Marseille, another young man was left between life and death following a police intervention, to the point that part of his skull had to be removed. During the protests against the pension reform, serious injuries, severed hands and lost eyes also accumulated.

In Iran, protesters are shot with live ammunition. In Emmanuel Macron's France, the preference seems to be to maim people with LBD rubber bullets or grenades. The comparison is deliberately brutal, but it reflects a deep sense of unease: that of a country in which a growing share of the population believes that policing has gradually turned into a strategy of intimidation.
That unease is all the harder to dismiss because French policing practices since Macron came to power have repeatedly been called into question far beyond our borders. United Nations bodies have expressed serious concern about the excessive use of force and the use of intermediate weapons capable of causing serious injuries. The Council of Europe has also directly reminded France of its obligations, condemning the excessive use of force and calling on the authorities to protect peaceful demonstrators from police violence. This is therefore no longer merely an accusation made by opponents of the government. For several years, French policing methods have been criticised by international institutions specifically responsible for protecting fundamental rights.

This week, history repeated itself.

A 14-year-old boy who was resisting was not simply restrained and arrested, as one would expect in a country governed by the rule of law. He was shot in the face with a grenade launcher at very close range. As the scene was filmed, it was unfortunately predictable that the images would trigger a violent reaction from part of the country's youth the following day.
The problem now goes far beyond the issue of policing alone.
After nearly ten years of Macronism, public exasperation is widespread. The national education system is exhausted, hospitals are at breaking point and public services are in tatters. Entire sectors of industrial excellence have disappeared or been sold off. Agriculture and fishing are effectively brain-dead. In many parts of the country, people can see the state retreating everywhere.

On top of this come all the questions that have surrounded Emmanuel Macron's career and decisions for years.
Before his death, MP Olivier Marleix had notably referred to the judicial authorities suspicions concerning certain economic transactions with which Emmanuel Macron had been associated while serving as a minister. We continue to believe that full light must be shed on the Alstom, Technip, Alcatel and EDF cases and, more broadly, on the major industrial transactions carried out or facilitated during that period.
The same standards of transparency should apply to the financing of his election campaigns, his links with Havas and the Bolloré Group, the terms granted to certain large corporations, and decisions involving land owned by the state. This is not about passing judgment before the courts have ruled. It is precisely about asking the justice system to investigate, establish the facts and answer questions that, in some cases, have remained unanswered for years.

As for the budget, it is becoming increasingly difficult to ask the French people to continue believing the constant rhetoric about the need for austerity.
Parliament has just adopted an update to the Military Programming Law adding an extra €36 billion to planned defence spending between 2026 and 2030. The law was promulgated on August 16, 2026.
An additional €36 billion for defence can therefore be found within a matter of months. At the same time, every additional euro spent on hospitals, schools or public services is presented as a threat to the balance of the public finances. This contradiction is becoming increasingly difficult to explain to the French public. On top of this comes the cost of the military show of force decided upon in the Middle East.

All of this raises a simple political question: at a time when the French are being told that savings must be made on pensions, public services, healthcare and local authorities, how can tens of billions of euros be found so quickly for rearmament while another billion euros can be absorbed within a few months by the intensification of overseas military operations?
The legitimacy of maintaining armed forces is not the issue. The issue is the hierarchy of budgetary priorities being imposed on the French people. The very origin of this deployment also deserves to be recalled. On March 3, following the attack on Cyprus and the detection of two drones heading towards the British bases at Akrotiri, Emmanuel Macron ordered the Charles de Gaulle carrier strike group, which was then operating in the North Atlantic, to head towards the eastern Mediterranean. In other words, an initial incident involving two €6,000 drones became the starting point for a French military deployment on a considerable scale. Protecting Cyprus and French nationals is, of course, a legitimate responsibility of the state. But the disproportion between the initial threat and the resources ultimately mobilised deserves, at the very least, to be questioned, particularly when the government is simultaneously announcing close to €1 billion in additional operational costs while telling the French people that there is no longer any budgetary room for hospitals, schools or public services.
That is precisely where the problem lies: nobody is asking France to abandon its defence capabilities. We are simply asking why budgetary constraints suddenly become absolute when public services are concerned, but far more flexible when Emmanuel Macron decides to project a substantial share of French military power thousands of kilometres from our shores over two drones!

The political outcome is becoming catastrophic. The French have become so disillusioned that some of them are now considering removing this entire political establishment by bringing to power a far-right leader who has herself been convicted in a case involving the misuse of public funds. That is perhaps the most devastating political legacy of Macronism: having destroyed confidence in institutions, traditional political parties and public discourse to such an extent that part of the country now sees the far right as the only possible alternative.

The consequences will not remain confined to domestic politics. In the European bond market, we have just witnessed the sea receding before the tsunami. France is now combining a massive deficit, uncontrolled debt, deep public mistrust and an apparent inability to produce a credible fiscal trajectory. As the political crisis develops into a crisis of confidence, the issue is no longer simply the government or the next budget: the French risk premium is gradually entering the equation.
Markets can ignore politics for a long time. They cannot indefinitely ignore solvency, institutional instability and the loss of fiscal credibility.

And behind this situation, one political responsibility outweighs all the others: that of Emmanuel Macron.

UST yield curve

UST yield curve
UST Dashboard

UST
General US bond market volatility

UST Volatility

Flag USUS 10-year government at 5.273

10-year T-Note US Government

Buyer PressureSeller Pressure

Fundamental trend : Bullish

The predominant buying pressure is sliding gently, the selling pressure is declining at a slower pace.

For this week, the US 10-year yield is expected to remain capped below the 5.190 / 5.213 resistance area and move toward the 5.100 / 5.060 zone.

Volatility HV * 21 D. 252 D. LTV
Average range * Daily 0.088 Weekly 0.179
Max. weekly range * 4.986 5.344

* Anticipated

German yield curve

German yield curve
German bond market

German bond market
German bond Volatility

German bond Volatility

Flag GermanGerman 10-year government at 3.466

10-year Bund German Future and yield

Buyer PressureSeller Pressure

Fundamental trend : Bullish

The predominant buying pressure is stagnating, the selling pressure remains stable but is gradually gaining momentum.

For this week, the German 10-year yield is expected to test the 3.569 / 3.545 support area and find a floor around 3.505 / 3.481.

Upside moves are expected to remain capped by the 3.691 / 3.713 resistance area.

Volatility HV * 21 D. 252 D. LTV
Average range * Daily 0.064 Weekly 0.182
Max. weekly range * 3.418 3.782

* Anticipated

FrenchFrench 10-year government at 4.866

French yield curve

French yield curve
French bond market

French bond market
French bond Volatility

French bond Volatility
10-year OAT French Future and yield

10Y OAT
Volatility HV * 21 D. 252 D. LTV
Average range * Daily 0.096 Weekly 0.198
Max. weekly range * 4.496 4.892

* Anticipated

Italian flagItalian 10-year government at 4.610

Italian yield curve

Italian yield curve
Italian bond market

Italian bond market
Italian bond volatility

Italian bond volatility
10-year BTP Italian Future and yield

10Y BTP

Flag EuropeEURUSD at 1.1255

EURUSD quotation and volatility

Buyer PressureSeller Pressure

Fundamental trend : Consolidation

The buying pressure is declining at a slowing pace, the predominant selling pressure is sliding at an accelerating pace.

For this week, the single currency is expected to break above the 1.1424 / 1.1444 resistance area and find a ceiling in the 1.1493 / 1.1513 zone.

Downside moves are expected to remain limited by the 1.1353 / 1.1335 support area.

Volatility HV * 21 D. 252 D. LTV
Average range * Daily 0.0055 Weekly 0.0152
Max. weekly range 1.1239 1.1543

* Anticipated

Flag USSP500 at 7722

SP500 Index quotation and volatility

Buyer PressureSeller Pressure

Fundamental trend : Bullish

The buying pressure is increasing at a sustained pace, the predominant selling pressure is rising at a more contained pace.

For this week, the index is expected to test the 7796 / 7816 resistance area, with the move likely to remain capped by the potential 7816 / 7832 resistance zone.

Downside moves are expected to remain limited by the 7662 / 7644 support area.

Volatility HV * 21 D. 252 D. LTV
Average range Daily 57 Pts Weekly 119 Pts
Max. weekly range 7624 7862

* Anticipated

VIX INDEX à 15.31
VIX VIX & SP500 / UST
VIX term structure VIX term structure
Smiles monthly options Smiles monthly options
IMPLIED VOLATILITY SP500 OPTIONS

Over 1 week, variation of the centered volatility (monthly maturities)

SPX 2026/10/16 2026/11/20
IV 13.436 ( + 1.892 pts) 14.017 ( + 0.662 pts)
CALL 13.434 ( + 1.880 pts) 14.014 ( + 0.646 pts)
PUT 13.438 ( + 1.904 pts) 14.020 ( + 0.678 pts)
SP P/C + 0.004 ( + 0.024 pts) + 0.006 ( + 0.032 pts)

The centered implied volatility of SPX options increased faster for the October maturity than for November.
Compared with the VIX index, the implied volatility of SPX options rose faster in October, while remaining broadly unchanged in November.
At-the-money calendar spreads (SPX, SPY) declined while remaining positive, leaving a premium on the shorter maturity.
The at-the-money Put/Call volatility ratio on SPY edged lower in October and remained broadly unchanged in November, while staying in negative territory.

October Maturity The change from last week is clear. The premium that had become heavily concentrated in very far OTM calls has moved back toward the center of the smile this week. ATM volatility has become more expensive, while the most distant strikes have lost value. The move is particularly pronounced on the right wing. The farthest OTM calls, which had benefited from a strong re-pricing the previous week, have declined sharply in relative value. The gap between distant puts and calls has widened, but mainly because calls have fallen more sharply, not because OTM downside protection has become more expensive.
The left wing does not show any broad strengthening either. Intermediate puts are holding more value, while the most distant puts are not seeing comparable demand. The market is not re-pricing a sharp downside scenario for October. The decline in the premium attached to extreme moves points in the same direction: they are becoming cheaper relative to near-term or intermediate moves. Premium is shifting from the tails back toward the center of the distribution.
The structure is becoming less directional than it was last week. The market is paying more for the possibility of a move around current levels, and less for an extension into an extreme move, especially on the upside.

November Maturity November confirms the same shift, but in a more moderate way. ATM and intermediate strikes are regaining premium while the tails of the smile are weakening. The right wing is also losing value, but without the same adjustment seen in October. The far end of the left wing remains relatively stable. The decline in premium on OTM options again shows that extreme scenarios are being priced less aggressively. Premium is becoming more concentrated around medium-sized moves. November confirms the move seen in October, but with less intensity.

Flows and Positioning The main move is the removal of the premium that had built up in very far OTM calls. The re-pricing of a strong upside scenario seen last week has therefore been largely reversed. This has not been matched by an equivalent increase in demand for OTM puts. In other words, this is not simply a transfer of premium from the right wing to the left wing. Premium is moving back toward ATM and intermediate strikes, with options used to hedge or position for a moderate move retaining more value, while the most distant scenarios are attracting less demand.
This also reduces the importance of hedging flows linked to very far OTM calls. Last week, a continued rise in the index could theoretically have increased dealers’ hedging needs. That mechanism becomes less relevant if part of that demand has now been unwound. Caution is still required, however. The surface shows where premium is increasing or decreasing, but it does not directly reveal the direction of dealer positioning.

Volatility Premium The VIX term structure remains in contango. The main change is concentrated at the front end of the curve. Spot VIX and the first maturity have firmed relative to the rest of the curve, while the medium-term segment remains much more stable. The market is slightly increasing the price of near-term volatility without pushing that move across the whole curve. This is consistent with what the SPX options surface is showing. ATM volatility is becoming more expensive while the most distant strikes are losing value. The market is paying more for the possibility of a move around current levels, but is not re-pricing an extreme move to the same extent.
There is still a difference between the two markets. VIX futures are retaining more premium on later maturities, while the SPX surface is removing value from the wings. The structure therefore points more to a short-term segmentation, with more premium around immediate moves and less value assigned to very distant scenarios.

Outlook The SPX is trading between a first cluster of nearby supports and a resistance zone just above. The main resistance levels are 7779, 7793 and 7816, followed by 7980 / 8016. On the downside, the first supports are around 7719, 7699, 7677 and 7649, followed by 7620 and deeper levels. The options structure is consistent with this setup. The increase in volatility around ATM gives more value to a move around the current zone. By contrast, the decline in premium on very distant strikes shows that the market is not paying more for a sharp extension of that move.
On the downside, intermediate puts are holding more value than OTM puts. The surface therefore remains consistent with a break of the first support levels, but it does not show a marked increase in the price of a deeper decline.
On the upside, intermediate calls remain supported, but OTM calls have lost a large part of the premium gained last week. The market therefore continues to assign value to a move above the first resistance levels, but is paying much less for a rapid extension toward the higher levels.

The regular purchase of small OTM puts only harms the seller.

As every week, the operations related to the weekend Theta are expected to exert bullish pressure on Monday and bearish pressure on Friday on the implied volatility.