Hedge funds eyeing exposure to European sovereign credit will soon have a new tool at their disposal, as Deutsche Boerse’s derivatives exchange Eurex prepares to launch futures contracts on European Union (EU) bonds, according to a report by Reuters.
Set to begin trading on 10 September, the new contracts represent a milestone in the EU’s evolution as a sovereign-style borrower, just as it prepares to raise further joint debt to fund defence initiatives and respond to geopolitical pressures.
The launch comes as the EU ramps up efforts to build out its capital markets infrastructure, aiming to position its common debt alongside traditional benchmarks like US Treasuries and German Bunds — both of which are supported by highly liquid futures markets.
“This is a strategic commitment to supporting Europe’s ambitions for greater financial autonomy,” said Matthias Graulich, Global Head of Products and Markets at Eurex. “As the continent leans on additional debt issuance, investors increasingly need tailored tools to manage EU bond exposure.”
The contracts will be based on EU bonds with maturities between eight and 12 years and will feature a 6% notional coupon, mirroring Eurex’s existing 10-year futures for German, French, Italian, and Spanish government bonds.
The EU is set to issue over €700bn in joint debt by 2026, primarily to fund its Covid-19 recovery programme, making it one of the largest supranational borrowers globally. Now, with discussions underway to issue up to €150bn more to fund defence spending across member states, the need for secondary market instruments like futures has grown increasingly urgent.
For hedge funds, the new EU futures offer both hedging and tactical trading opportunities, particularly for macro and rates-focused strategies seeking efficient ways to express views on the eurozone’s fiscal trajectory or inflation expectations.
The move follows a similar initiative by ICE, which launched a futures contract based on an index of longer-dated EU bonds in December.
