At Any Rate European Rates: ECB and BoE February meetings, skinny carry in Euro area, increased UK political noise
11 snips
Feb 6, 2026 
Aditya Chordia, J.P. Morgan fixed income strategist focused on spread and carry trades, and Khagendra Gupta, J.P. Morgan European rates strategist expert on central bank liquidity tools, discuss ECB and BoE February decisions. They unpack ECB repo and swap frameworks, talk limited market impact from facility tweaks, warn on skinny carry across euro spreads, and debate rising UK political noise and gilt moves.
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ECB On Hold, Repo Lines Are Tactical
- The ECB remains firmly on hold and views changes to its repo/swap framework as low-frequency, targeted adjustments.
- Khagendra Gupta expects repo line extensions but sees minimal market impact given very low actual borrowing.
Be Cautious With Skinny Euro Carry
- Avoid crowded intra-EMU carry positions when spreads are very tight and offer little cushion.
- Wait for further widening or use convex hedges before re-entering carry trades, as Aditya Chordia recommends.
Euro Volatility: Fade The Pop-Ups
- Short volatility strategies in euro volatility markets remain attractive if yields stay range-bound and delivered vol stays muted.
- Khagendra Gupta favors fading spikes in implied vol, especially at the top-left of the surface.