Week in review (Europe) The FTSE100 reached 13 months highs last week as the BOE exceeded market expectations by announcing a 25 bp rate cut (its first rate cut in 7yrs}, a further £60bn of QE purchases (vs forecasted £50 bn) while also hinting at more potential stimulus in the autumn. Unsurprisingly, GBPUSD fell further on the back of this. The better-than- expected US nonfarm payrolls that beat all surveyed forecasts helped drive US markets to new all-time closing highs also helped European equities rebound from a mid-week trough. As a result, the V2X has retraced close to its 11 month lows as foreseeable catalysts are behind us for a potentially quieter end to the summer. « Long dated ESTX50 var term structure is historically elevated; vol term structure is not: The dislocation of 3y var convexity (var strike/ATMf volatility) vs that of ly, which in itself is near extremes, is particularly striking - European issuance of ESTX50-linked structured products picked up in July: We estimate issuance of ~€120Mn/day in July, which compares to €5Mn daily issuance in June and €55Mn daily issuance in 1H16 (excluding June). - The current vega outstanding in SX5E-linked products is €143Mn, which is in its 97 percentile since Jan-14 (when our records begin}. Moreover, this could rise to as much as €169Mnh if the SX5E rallied to 3280. Long-dated ESTX50 var term structure is steep; vol term structure is not Despite a significantly steep longer dated ESTX50 variance term structure (vs its average since 2008), the volatility term structure is nearly flat. As a result, the level of ESTX50 long dated variance is historically elevated vs the level of long dated vol. The dislocation of 3y var convexity (varswap strike/ATMf vol ratio) vs 1y var convexity (which in itself is near its historic highs) is particularly striking. Chart 21: Longer dated ESTX50 variance term structure is significantly Chart 22: ESTX50 variance convexity (varswap strike/ATMf vol ratio) is elevated vs long term