Kumowizard

#Bund bird view - once 159 goes, the yield blows

FX:BUND   Euro-Bund
99 0 13
- Ichimoku setup has bearish bias, but for a confirmed strategic bearish Kumo breakout it has to fulfil one more criteria: a close below the last reaction low!
- A lower low close would also break the 4 years long bullish trendline , which was touched during last few weeks.
- Please note that this is the chart of the continous (non tradable) contract, which includes the discount and premium changes between each tradable front contract change. Most of people don't understand the reason behind these gaps between certain contracts. This is mainly due to the Cheapest To Delivery bond calculation process. Why is it important? Because now we are trading FGBLM7 (June contract) at 159,95, but the next tradable FGBMU7 (September contract) trades 150 points higher, at 161,45.
If the triangle will not break on the lower side until June contract maturity, then by contract change time (8/June) the continous contract chart could technically spike, while the underlying 10y bond yield may not change at all.
- Anyway, even from this continous chart it looks like some consolidation has started above 159. Not the best time and level to enter shorts.
If June contract could move up to 162,50 +/-, there we'll have to look for a sell signal.
- The absolute key level will be 159+ (which tradable front contract will break it, we don't know)

What we know is that the bond markets are in a bubble. So is the German bond market, especially on the shorter maturities, which still trade at negative yields! This bubble will burst once, and then the move will be quick and dramatic.
Maybe ECB will try to contain it, maybe that's why they are leaking the possibility of a rate hike before they start taper their QE program. That would mean they could still support an artificial bid side to Euro             bonds, just at a higher set yield level.
If this is really their goal, then probably this trend will break finally by around end of summer, beginning of Autumn this year.

Keep your eyes on it! And always look for a sell signal only! Bubbles we don't like to buy!
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