German Bund Futures Volatility Forecast (19/12/2010)

The last week we forecasted a drop of Bund futures in the 123.8 -124 euro and indeed that is where the price ended up.

The volatility plot shows again an upward sloping curve and the current level of 0.45% (7.1% annualised) is likely to achieve 0.5% (7.9% annualised) by the end of the week. Consequently, such an increase in volatility should drive prices down in the 122 area and the end of the year, in addition to the great panic still “embracing” this market, are likely to act an increasing role as market movers for Bund futures.

The volatility kept rising over the last 2 months and this should be the final upward movement, in fact, a sharp collapse is expected in the long run and this should stabilise the price of German Bund futures.

The staff of HyperVolatility remains bearish on Bund and suggests you not to buy back your short positions because ulterior returns are to be gained during the next trading days.

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