German Bund Futures Volatility Forecast (14/03/2011)

The German Bund futures market experienced a sideways movement over the last days after the sharp gap-down-opening of the last Wednesday.

The volatility is rising and it is now close to 0.43% (6.8% in annual terms) but the TGARCH plot is still upward sloping and therefore a further augment in market fluctuations should be expected. Nevertheless, the volatility is quite close to its highest level, which is still set between 0.45% – 0.48% (7.1% – 7.6% annualised), and a mean reversion process is quite likely to happen in the upcoming days.

Furthermore, we all know that the German Bund is considered to be a safe asset class and consequently, the Japan’s earthquake and the falling equity markets will push quite a few investors to buy Bund futures in order to earn some extra returns.

The staff of HyperVolatility will look for long opportunities because the price could get back in the 123 euro zone by the end of the week whilst the volatility should drop and eventually touch 0.38% (6% annualised).

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