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 : 12/08/2025 - 10:30 am GMT

NOTE :

As we do every year, we are taking a break for the year-end holidays. As this weekly note is the last one of 2025, our forecasts and comments will cover a broader horizon.
The “Systems” and “Futures Rates” sections will continue to be updated until 12/12.

We wish you happy year-end holidays and look forward to seeing you again in mid-January when we resume.

Memento

US Bond Market

U.S. yield curve returns have evolved unevenly, with the curve steepening due to a decline in short-term yields (1- and 3-month) and an increase in medium- and long-term yields.
The short end of the curve benefited from a liquidity influx into 1 and 3-month bills, reflecting strong expectations of a policy rate cut. Uncertainty surrounding this cut had led institutional investors to position themselves in March contracts rather than December contracts. This decline in bill yields has significantly reduced the short-end inversion 2Y vs.3M.
The 10-year vs. 2-year segment has steepened further, with the 10-year yield rising more rapidly. Inflation concerns remain unchanged, with the prevailing view being that inflation is persistent but contained. In our view, the increase in the 10-year yield mainly reflects capital outflows from investors in this benchmark maturity. The 30-year versus 10-year spread confirms that this is neither an anticipated rise in inflation nor an increase in the term premium, as evidenced by the reduced steepening of this spread.

At year-end, the 10-year yield spread between the T-Note and the Bund or JGB shows, unlike in the U.S, an expansion of the risk premium for Germany and Japan. The significant stress observed in the Japanese interbank market suggests a likely rate hike as early as next week. The consequences of such a move, combined with expectations of a gradual normalization path, are likely to prompt Japanese institutional investors to reposition their exposure, notably by trimming their holdings of French, German, U.S., and other comparable sovereign bonds.
This reallocation flow, colliding with ongoing sovereign bond issuance in other countries, risks steepening yield curves, but for the wrong reasons. The steepening would not be driven by healthy economic fundamentals, but rather by technical pressures and flow-related constraints.

As of today, SOFR futures and the Bills are anticipating a rate cut at the December meeting, albeit with little conviction. This corresponds to an overall forecast of a cumulative 25 basis point reduction in rates by the end of March 2026.

CME FedWatch, Implied probabilities of FOMC decisions derived from 30-day Fed Funds futures.

Volatility (HV)	Trend	Historical level	Risk of violent variation	Move Index (IV)	HV - Move Index (IV)
Long-term		High	High
Short-term		Standard	High

Volatility in the U.S. market and in the European bond market has declined at a similar pace. Long-term volatility (HV) continues to fall, driven by the decline in short-term volatility (HV).
Implied volatility (IV), calculated as an average of short-term maturities and reflected by the MOVE index, indicates easing market tension.
The 5-year maturity is the one showing the highest sensitivity.

European bond market

This week, euro area yield curves moved in a generally uniform manner, with rising rates steepening the curves at different speeds.
On the 2-year versus 3-month spread, the evolution was similar for Germany and Italy, showing a slight flattening, while France saw a pronounced steepening.
On the 10-year versus 2-year spread, steepening was broad-based but varied in magnitude: the German curve tightened slightly, while the French and Italian curves tightened significantly.
The 30-year versus 10-year spread confirms an increase in the risk premium associated with duration.

For France, the French yield curve, already weakened by the deterioration of its sovereign credit profile, continues its descent into hell, accelerating its decline. The media circus of the Élysée clown goes on. After a visit to China, where he had declared that Taiwan’s fate ultimately mattered little, he treated us to yet another astonishingly foolish statement, claiming that Europe must defend its automotive and machine tool industries. One could have reminded him of the €5 billion loan granted to Renault to relocate its production facilities to China.
As for his comments on machine tools, he once again imagined himself the spokesperson for an entire continent, while France is entirely absent from this sector. But it is true that this out-of-touch bureaucrat still has not realized that a country without industry has little left to defend. Examples abound, Safran, with the SCAF program, forced to establish in Germany, Thales as well to sell radars, while France buys German rifles without ever demanding that a factory be built on its own soil.

European 10-year spreads relative to German Bunds reflect a reshaping of sovereign risk, with a marked deterioration of the French credit profile.
The spread with France has eased, while all of Europe, stuck with OATs, is questioning itself. The spreads of Italy and Spain are trending lower, driven by the faster rise in the German 10-year yield.

The volatility of the European bond market has evolved at a slower pace than that of the UST. Long-term volatility (HV) continues to decrease, driven by the decrease in short-term volatility (HV).

As of today, Euribor and ESTR futures do not anticipate any rate cut for the December meeting, which is in line with an overall expectation of a cumulative 0 basis point reduction by the end of March 2026.

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

EURUSD parity

This week, the dollar continued to slide, slowing its downward movement. The decline was particularly pronounced against the Australian dollar, the Canadian dollar, and the Thai baht. The Brazilian real, on the other hand, eased the dollar’s overall decline by reversing last week’s movement.
The drop in yields on US money market and bond assets, coupled with the holiday lull that will reduce dollar need, are factors that will contribute to weakening the greenback over the medium term.

Regarding the USDJPY pair, the dollar is already experiencing a pullback due to expectations of a decrease in US interest rates and an increase in BoJ rates. This pullback is expected to intensify once these rate moves are actually implemented, but this decline will remain temporary, and the greenback will resume its upward trend thereafter.

The euro made slight gains against most currencies, particularly against the Brazilian real, the Indian rupee, and the Philippine peso, while it posted a significant decline against the Australian dollar.
The stability of monetary and bond rates should continue to support the euro, despite a sluggish growth outlook and pressure from the United States urging Europeans to accept Russia’s imposed peace terms in Ukraine, a compromise that would heighten the risk of a major conflict in Europe.
From a purely technical standpoint, the underlying dynamics of EURUSD show a dual calming signal in favor of the euro. In the short term, pressure on dollar liquidity is easing, indicating a weakening demand for dollar hedging after the late-November squeeze. This renewed calm is also spreading to the forward curve, where its significant jump shows that operators are no longer merely managing shortage risk but are massively resuming long positions in the euro, anticipating a decline in the monetary yield differential.

The dollar’s movement has not led to an increase in short-term volatility (HV), which remains stagnant for now. This stagnation has slowed, but not reversed, the decline in long-term volatility (HV). Among the currencies contributing to the persistence of short-term volatility (HV), we notably find the Brazilian real, the Canadian dollar, and the Indian rupee.
Apart from the Argentine peso, the Canadian dollar is only experiencing a temporary rebound in short-term volatility (HV), not a sustained upward trend. By contrast, the Indian rupee is in a genuine underlying upward trend in historical volatility (HV), making it potentially the most explosive currency against the dollar.
This easing in the dollar’s historical volatility (HV) is only a temporary illusion, a rebound in volatility is expected in the medium term.

Regarding the euro, the decline in short-term volatility (HV) has helped accelerate the retreat of long-term volatility (HV). With the exception of the Russian ruble, which remains volatile against the single currency, the Argentine peso and the Brazilian real have contributed to slowing the decline in short-term volatility (HV). Without calling into question its underlying downward trend, the volatility (HV) of the EURGBP pair remains resilient.
The implied volatility (IV) index for the EURUSD pair continues to face increasing downward pressure. After the decision of the U.S. central bank and a potential temporary noise, volatility (IV) is expected to remain close to its current level or even drop by one level.

Equity Indices

The rise in U.S. indices is expected to continue, pulling other global indices along, although the magnitude of the movement may vary. The sharp anticipated cut in U.S. interest rates will remain a powerful driver for equity markets. The resulting shape of the yield curve will primarily benefit financial stocks, as access to credit is likely to be constrained by high long-term yields, which will particularly favor insurers and similar players.
However, the Christmas lull and reduced market participation make price movements more unpredictable. Additionally, the Bank of Japan’s monetary policy decision should, in principle, encourage temporary profit-taking to free up liquidity.

Short-term volatility (HV) has decreased more sharply for North American indices, this decline has helped ease the elevated level of long-term volatility (HV) across most indices.

This dashboard, offers you a quick overview of the US bond market.

Key levels, volatility, and pressures on the US curve, futures, yields, and spreads are put into perspective in the Rates section.
US curve levels, futures, and yields are available in our Real-Time section.

UST yield curve

UST

UST Volatility

US 10-year government at 4.138

Buyer PressureSeller Pressure

Fundamental trend : Consolidation

The buying pressure is progressing by accelerating its speed, the dominant selling pressure is stagnating.

In the coming weeks, the US 10-year yield is expected to test the resistance zone at 4.192 / 4.208 before finding a ceiling in zone 4.233 / 4.245.

Its downward movements should be limited to the support zone of 4.049 / 4.035.

Volatility HV *	21 D.		252 D.		LTV
Average range *	Daily	0.061	Weekly	0.132
Max. weekly range *	4.006	4.270

* Anticipated

This dashboard, offers you a quick overview of the German bond market.

Key levels, volatility, and pressures on the German curve, futures, yields, and spreads are put into perspective in the Rates section.
German curve levels, futures, and yields are available in our Real-Time section .

German yield curve

German bond market

German bond Volatility

German 10-year government at 2.801

Buyer PressureSeller Pressure

Fundamental trend : Consolidation

The buying pressure is progressing by accelerating its speed, the dominant selling pressure is declining at a steady pace.

In the coming weeks, the German 10-year yield should break through the resistance zone 2.795 / 2.825 sustainably to find a ceiling below the level 2.901 / 2.919.

Its downward moves should be limited to the support zone at 2.743 / 2.734.

Volatility HV *	21 D.		252 D.		LTV
Average range *	Daily	0.043	Weekly	0.124
Max. weekly range *	2.677	2.925

* Anticipated

This dashboard, offers you a quick overview of the French bond market.

Key levels, volatility, and pressures on the French curve, futures, yields, and spreads are put into perspective in the Rates section.
French curve levels, futures, and yields are available in our Real-Time section.

French 10-year government at 3.526

French yield curve

French bond market

French bond Volatility

10Y OAT

Volatility HV *	21 D.		252 D.		LTV
Average range *	Daily	0.041	Weekly	0.110
Max. weekly range *	3.416	3.636

* Anticipated

This dashboard, offers you a quick overview of the Italian bond market.

Key levels, volatility, and pressures on the Italian curve, futures, yields, and spreads are put into perspective in thee Rates section.
Italian curve levels, futures, and yields are available in our Real-Time section.

Italian 10-year government at 3.488

Italian yield curve

Italian bond market

Italian bond volatility

10Y BTP

EURUSD at 1.1642

Buyer PressureSeller Pressure

Fundamental trend : Consolidation

The buying pressure is progressing by accelerating its speed, the dominant selling pressure is progressing by slowing its pace.

In the coming weeks, the euro is expected to test the resistance level of 1.1703 / 1.1717 before finding a ceiling in the 1.1765 / 1.1786 zone.

Its downward movements should be limited to the support zone of 1.1584 / 1.1575.

Volatility HV *	21 D.		252 D.		LTV
Average range *	Daily	0.0057	Weekly	0.0157
Max. weekly range	1.1485	1.1799

* Anticipé

SP500 at 6870

Buyer PressureSeller Pressure

Fundamental trend : Bullish

The buying pressure is increasing, the predominant selling pressure is decreasing at a regular pace.
At its core, the underlying buying momentum remains steady, while the peak of selling momentum is fading. This setup indicates a persistent buying pressure that expands or contracts depending on selling activity, but remains present in the background.

In the coming weeks, the index is expected to break its all-time high at 6920.

Its downward movements should be limited to the support zone 6777 / 6764.

Volatility HV *	21 D.		252 D.		LTV
Average range	Daily	64 Pts	Weekly	157 Pts
Max. weekly range	6713	7027

* Anticipé

VIX INDEX à 15.41

VIX & SP500 / UST

VIX curve

VIX Contango

VIX futures spread

IMPLIED VOLATILITY SP500 OPTIONS

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

SPX	01/16/2026	02/20/2026
IV	13.25 ( - 0.85 pts)	14.45 ( - 0.58 pts)
CALL	13.27 ( - 0.84 pts)	14.45 ( - 0.59 pts)
PUT	13.23 ( - 0.85 pts)	14.44 ( - 0.57 pts)
SP P/C	- 0.04 ( - 0.01 pts)	- 0.01 ( + 0.02 pts)

Smile January

Smile February

January & February

SOFR 1 & 3-month

The centered implied volatility of SPX options has slipped for both maturities. Compared to the VIX index, the centered volatility (IV) of SPX and SPY options for these two monthly expirations has evolved at the same pace.
The centered implied volatility put/call ratio (SPY) has stabilized for both maturities, at a higher level in January.
The parity calendar spreads for the two expirations (SPX, SPY) have stabilized near a level triggering a short calendar.
The centered implied volatility of american options for the two maturities has changed little: puts are higher, the same for February calls, while January calls are lower.

The January smile has deepened, with implied volatility (IV) decreasing across the entire curve, especially at the center. The wings, however, have declined more slowly, with a skew that has strengthened, more on OTM puts and, to a lesser extent, on calls.
For February, the configuration has evolved identically but with lower intensity. The persistence of a pronounced skew shows that traders maintain a strong demand for protection against a shock. The market has calmed down as it reaches its highs, but risk remains clearly embedded in OTM options.

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.