21 Jan 2015
Bunds overbought, but the bull trend still intact – RBS
FXStreet (Barcelona) - Analysts at RBS note that Bunds are overbought to levels not seen since the LTCM crisis of 1998, but the bull trend still remains intact, further adding that the 10yr German yields might fall further towards 0.25% from the current 0.48%.
Key Quotes
“Long maturity Treasuries and Bunds are deeply overbought from a short, medium and long-term perspective though bull trends are still intact.”
“Our EU rates guys have argued that German 10yr yields (0.48%) are likely to fall to Japan-like yields (0.25%). That may be true and we'll probably learn more about that tomorrow.”
“But the way I think about these markets (recall that the 'voice' of these comments speaks to real$ accounts with a 3mo-12mo investment horizon) can be summed up in this statement about Bunds: "Bund yields have declined 422 basis points since July 2008. Do you buy Bunds here to try to catch another 23bp in a deeply over-extended move?" I wouldn't because in the similarly over-extended Treasury market we can observe that the positioning (CFTC Specs and Levered money net LONG ED$ futures for the first time since 2013), trader sentiment (a frothy 89% bulls in US bond futures) and momentum studies all suggest an asymmetrically bearish skew for rates over the medium term.”
“Bunds haven't been this overbought since the LTCM crisis of 1998 and in Treasury bonds since the former all-time rate lows were made in 30yrs back in July 2012.”
Key Quotes
“Long maturity Treasuries and Bunds are deeply overbought from a short, medium and long-term perspective though bull trends are still intact.”
“Our EU rates guys have argued that German 10yr yields (0.48%) are likely to fall to Japan-like yields (0.25%). That may be true and we'll probably learn more about that tomorrow.”
“But the way I think about these markets (recall that the 'voice' of these comments speaks to real$ accounts with a 3mo-12mo investment horizon) can be summed up in this statement about Bunds: "Bund yields have declined 422 basis points since July 2008. Do you buy Bunds here to try to catch another 23bp in a deeply over-extended move?" I wouldn't because in the similarly over-extended Treasury market we can observe that the positioning (CFTC Specs and Levered money net LONG ED$ futures for the first time since 2013), trader sentiment (a frothy 89% bulls in US bond futures) and momentum studies all suggest an asymmetrically bearish skew for rates over the medium term.”
“Bunds haven't been this overbought since the LTCM crisis of 1998 and in Treasury bonds since the former all-time rate lows were made in 30yrs back in July 2012.”