Bunds - why does no one believe in new lows? Chart says 1% Germany by August..

It's Friday – it's time to look at longer dated chart and more unusual charts…..Today's focus Bunds, China coming devaluation and Russia.

 

Bunds

 

I have all year called for new low in DM rates despite consensus focusing on tapering…. Here is two charts both of which states clearly – baring "surprise" to upside in growth the trend is to 1% Germany rates by August!

 

 

Note where channel ends in August – sub-1% but 1.4000% is critical leve..

 

More importantly – the long term view:

 

Again 1.0% Germany & inside 2014….. also 1.4000 the support level for now…(A mere 10 bps from here=)

 

 

Remember our projection on Bunds have been based on our JABA model (Econo-physic) model which indicated back in Q4 that Germany could face close to zero growth by Q4 in 2015.

 

Finally,

 

My longest used chart for fixed income – confirmation is coming soon…..30 YR to 2.50%

 

 

Remember this trend has continued despite 100% of macro strategist thinking US rates will be higher in six month time – despite extreme low volatility & complacency – despite the so called: Great rotation. Of course it reflects deflation, lack of growth and extremely poor policy responses, which this morning was indirectly admitted by Yellen:

 

 

Yellen concerned Fed model offers distorted prediction on prices

 

Yes, the policy makers talk, but market clearly disagree, especially the bond market.

 

Imagine if Russia/Ukraine "really" is at true geopolitical risk, if lowflation is not transitory, if growth does not come back again this year, if central banks have not alternative at zero bound, if Draghi is bluffing (as he often does)….., if China devalues…. ?

 

No, it will never happen. We have great diplomatic efforts on Russia, central banks understanding the true economy and politicians who are committed and fully in line with the real economy, plus an extremely strong bank sector – The King is dead, long live the King….

 

Greed is good – Leeman BrothaZ

 

Nice weekend

 

Steen

 

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

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