German Bund Futures Volatility Forecast (24/10/2010)

The German Bund is clearly under heavy pressure and the last week we saw an heavy selling taking place in the market.

There seems to be a robust support at 130 which,it would appear, investors are willing the re-test but the real problem is  IF THE BUND IS IN A TRUE BEAR MARKET WHY VOLATILITY KEEPS DIMINISHING?

The last week selling did not produce any increase in volatility ,which is quite suspicious for a bear market, and the HyperVolatility staff is still bullish on this market. The TGARCH volatility plot shows an extreme level of volatility and the question which immediately rises is: can it get any lower than this?

We suggest to be careful and you’d better watch your short positions on German Bunds because a large upward movement is expected.We think the change of the trend will being with a substantial increase of volatility which will stabilise soon after the rally.

As previously mentioned, the staff of  HyperVolatility remains bullish on Bunds unless the announcement of SERIOUSLY good macroeconomics data  breaks in.

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