Euro−Bund future – March 2010

Nicole Elliott from Mizuho Corporate Bank at 12/07/09

Comment: Understandably performing better than US TNote futures, retracing part but not all of the previous week’s gains. This has postponed but not changed our outlook for lower benchmark yields, here and for a series of other sovereign borrowers, around year-end. The Bund future is no longer overbought but bullish momentum has halved as lots of contracts are rolled over (highest weekly volume so far this year). Watch for a new interim low to form this month, followed by a rally to a new contract high in thin year-end conditions (especially between the 19th and 3rd).

Strategy: Attempt longs at 122.65; stop below 121.50. Add to longs on a daily close above 123.75 for 124.00/124.60 and probably 125.00.