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Bunds

Great Trades are Rarely Crowded: Long TLT and Short Twitter IQEveryone is a good trader in a bull market, but in a bear market, these good traders are reduced to hopium-fueled twitter analysts watching core CPI and interest rates. The former and latter data points serve nothing more as useless, out-of-context generalities for the single-celled Wall Street Bet retail enjoyer. But recent activity across the pond has sparked interest in the bond. These traders are now converting en-masse to self-proclaimed bond market experts with the thesis: "The bond market is broken" Except, the bond market is not broken. It is operating as intended, although two lines on a chart may disagree with anyone unfortunate enough to buy at the start of the year. Why is retail sentiment like this? The simple answer is that the fed is late, but a more-elaborate explanation follows: Bond yields rise because bond prices fall. It is the acquisition of a bond at a specific market price that determines that bond's yield, as a function of the difference between that bonds underlying rate (which is fixed) and the resale price. When interest rates rise, bond prices fall because newer bonds spawn with the higher base rate. This makes prior bonds, which have a lower fixed rate, less valuable because they output less extra cheddar. People then resell these bonds for a lower price and the yield rises according to market forces (the fed does not directly control this). Shorter duration treasuries follow interests rates very closely, whereas longer dated treasuries are difficult to influence by rate hikes. Either way these are secondary or tertiary market effects. This phenomenon is what results in an inverted yield curve: you can be paid more money to lend money for a shorter duration than a longer one. But why would something so illogical even happen? The answer is because the treasury market is not just any pig, it's a truffle-sniffing pig. For every brain cell in the equity or corporate credit market, the treasury market has a thousand-fold more. With these one-thousand brain cells, this pig (specifically the longer-dated pig) is rewarded by looking further ahead into the future. What does this pig see when they look that far ahead? An recession that will obliterate the equity market like Exodia. The long dated treasuries have started to price in a recession (very slowly) by pricing in rate cuts. This is why stocks and bonds are still correlated, but the correlation has started showing signs of weakness. The longer tail of the curve is smarter and refuses to sell these bonds like a fire sale. Recessions imply a fed pause and eventual rate cut, so no more high-interest treasuries. This makes bonds desirable, and this process is only starting now. I can already feel the credit market enjoyers seething and muttering: SLR relief expired! Reverse Repo! Basil Tea! No, none of these buzzwords matter. It's true that the pandemic has modified the initial conditions of the bond market. The TLT suffered immensely as the federal reserve promised to not raise rates through forward guidance, broke those promises (as is should have), and also allowed SLR Relief exemptions to expire. This made bonds less sexy and glamorous for banks like JP Morgan because the expiry affected treasury exemptions: banks didn't need to hold additional collateral to slurp bond yields, and now they again do. It's much easier now to park money with the fed overnight and get a little more back. The RRP is a much better facility than treasuries as a result, so bond indexes have dropped even harder. SLR relief is a cherry on top, but this truffle has always tasted good without it. It's absence, and whether it is reinstated or not, should not be a determining factor in the recovery of bond prices, because: No market has currently priced in a recession, and interest rate expectations demonstrate that without a chart, but when that happens, the bond market will get top billing. Bonds will decouple from stocks and TLT will rise from the ashes like a phoenix in the next quarters, incinerating twitter and reddit soys drawing lines on a chart and shorting the index. Nobody saw it coming, they will say, but good trades are never crowded. Smart money extracts the deep value from TLT in the pre-recessionary market by going long (DCA or otherwise). Degenerate smart money is gambling with TLT long calls. Whereas most of the market is still buying stocks, crypto, and chanting that the markets are broken and the fed will come roaring in. These pigs won't find any truffles in this market. Interest rate expectations are unrealistic and the fed will have to pause sometime early 2023. The recession will destroy demand, taking growth, inflation, and equity market with it, rising bond prices and dropping bond yields. The stock market will crash (I don't consider this current price action a crash yet) and continue burning even as the fed pauses, and dip buyers will be buying a dip that keeps on dipping while you're selling your new truffles on ebay because you lost your job due to mass layoffs across the entire economy.
NASDAQ:TLTLong
by coinhoIio
10
German Bund yields: secular reversalGerman Bund yields ( DE10Y ) are in the midst of a secular trend reversal after the breakout of both the 200-month moving average and a 40-year descending trend line. Yields on the 10-year Bund have never gone over the 200-mma mark before. The next barrier is the psychological threshold of 2%, which coincides with the September 2013 highs and 23.6% of the Fibonacci retracement level (all-time highs of 1981 to all-time lows of 2020). Breaking above 2% could then see the 3.7-3.8% yield as target (2009 highs and 38.2% Fibonacci). The ECB's forthcoming interest-rate hikes and Germany's rising inflation trend, which reached 7.9% in August, the highest level since German reunification, can exert substantial upward pressure on Bund yields in the coming months. In particular, the market may begin factoring in a greater volume of Bund emissions from the German state as a means of financing an expanding deficit caused by energy subsidies. The latest €65bn package is worth more than 3% of the German's GDP. With the ECB expected to reduce (or completely stop) government bond purchases, the German government would need to find buyers who demand higher yields due to rising interest rates and inflation. The current real rate of Bunds (the difference between the nominal and inflationary rates) is -6%, which is close to the lowest level ever. Idea written by Piero Cingari, forex and commodity analyst at Capital.com
TVC:DE10Y
by Capitalcom
Double Bottom in German Bunds, Expected Rally to 171.2Trend Analysis The main view of this trade idea is on the 15-Min Chart. German Bunds (FGBL1!) formed a double bottom or W chart pattern setup after testing 169.60 support and break above 170.3 resistance. Expectations are for the uptrend to continue, with the completion of the setup being around the 171.20 price level. Failure of the setup will be observed if FGBL1! were to decline below the long term moving average, taking the price to 169.80. Technical Indicators During the course of the double bottom setup, the respective short (50-MA), medium (100-MA) and long (200-MA) fractal moving averages had positive crossovers. Currently the price is trading above the respective MAs. Other technical indicators are also displaying bullish signs. The RSI is trading above 50 while the KST recently had a positive crossover. Recommendation The recommendation will be to go long at market, with a stop loss at 169.80 and a target of 171.2. This produces a risk/reward ratio of 1.37. Disclaimer The views expressed are mine and do not represent the views of my employers and business partners. Persons acting on these recommendations are doing so at their own risk. These recommendations are not a solicitation to buy or to sell but are for purely discussion purposes. Currently I have a position in FGBL1!.
EUREX:FGBL1!Long
by Ceddy86
(Alert) Good Buy Signal for FGBL at 175.84 Price ZoneFor now we can keep our position on FGBL (Euro Bund 10Years) and buy more at 175.84 because there are good signals that it will Continue to go up in the next couple hours Until it reach to price zone ( 176.32 to 176.17 ) and then it will bounce back. Theres a good Buy signal on 175.84 price zone that will have a great probability of winning (Time Frame 1H) My Proposition for Entry : 175.84 My Proposition for Target : 176.32 to 176.17 My Proposition for Stop Loss: 175.36
EUREX:FGBL1!Long
by MohamedC
German BUND Approaching Resistance - Elliott wave analysisHi traders, German BUND made a clear, five-wave drop in March, which is a sign of a bearish trend, however as we know after every five waves a temporary pullback may show up. Here we are observing a w-x-y correction underway, with resistance/bearish turn at the 174.80/176.8 region, where Fib. ratios of 0.618 and 0.786, and also equality measurement of waves w and y can suggest where price can slow down. Once we see a five-wave minor rally within a (c) wave of y, and a sharp drop from potential resistance levels, and a breach below the lower channel line, that is when BUND can resume its bear run. Trade well, The EW-Forecast team
EUREX:FGBLM2020
by ew-forecast
1
EURO - Where the money in the Euro-Area flowsHere you can see where the money in the euro area flows. It is clear that a lot of money is flowing out of the euro area but within the euro area the safe havens are being sought. At the moment these are still the German government bonds and you can see that very nicely since March and yesterday's panic high of the Eurobund Futures. After a short consolidation, I expect more highs to Bundfuture. That means a Lot more stress in the Euro- and Banking-system. Be careful with financials! The idea published here serves for the time being as illustrative material and has yet to establish itself. Greetings from Hanover Stefan Bode P.S. Press "Like" if you like it ;-)
ELong
by StefanBode
ridethepig | Bund Yields & Rate DifferentialsOn the other side of the Atlantic, a timely update to Bund yields with interest rate traders starting to position for 2020. The better prints from Germany are in the spotlight and this increase in interest is accentuated by the next fortnight of data deprivation. Here I am looking for DE10Y to re-test -0.234 next week. EUR$ remains in play to the topside with all eyes on 1.25 long term targets: View on Bund Yields is shifting towards the buy side leaves me comfortable leaning into rallies with -0.077 and 0.081 as extension targets in the swing. Will get excited about the topside on a clean break of the highs in US Yields: Overall, I want to be constructive on Bund yields here given relative ECB change via Lagarde, much tougher towards the fiscal side and improving relations. On the Brexit front, the restrictions that are like to be incorporated into the new round of positioning for Brexit transitioning flows (should be completed by H120), are likely to be "conditional" on US interference into future trade deals and thus not damaging for European assets till Q320. For those tracking the rate differentials charts: While those tracking the flows in FX will know the EUR$ map already: The floor has been placed, expecting Euro to begin rallying as we enter into the final pages of the cycle. US numbers are holding but is clear they wont be able to hold more than Q1 2020. Smart money will now position before waters become choppy. Thanks for keeping your support coming with likes and jumping into the comments with your charts and views.
TVC:DE10YLong
by ridethepig