German Bund Futures Volatility Forecast (05/12/2010)

The increase in volatility clearly drove the market down to 126 euro but the TGARCH plot seems suggesting a retracement of the price.

The volatility is now 0.45% (7.1% annualised) and even if a short term drop of the curve could restore the price for 1 or 2 days we believe that readings around 0.6% (15% annualised) would not be surprising.

In particular, the concerns about Europe and the stability of German economy, although the export seems to grow at an exponential rate, could push investors towards different asset classes.  The staff of HyperVolatility is still bearish on German bunds but a short term pull back in the 127 euro area could become reality in the first half of the following week.

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