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UPDATE
FundamentalTechnical
in association with
19th May 2011
Bund Uncertainty
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Fundamental
Technical
in association with
Disclaimer
Bund Uncertainty
MONTHLY BUND CHART
The market’s fall from the All Time
Highs of 2010 has been brisk.
More than that, it has smashedmultiple supports that have destroyed
hopes of the rally continuing: for
example, the breakdowns through
126.53, 124.60 and the steep rising
diagonal trendline support.
So medium-term bulls are dashed,but are the bears in charge?
WEEKLY BUND CHART
The rally from mid April broke the
sharp downtrend, but has paused
beneath the band of broken
supports, which (classically) now
becomes resistance.
And note too that the market has
failed there before…
Look closer still.
Oct N ov D ec 2009 Feb Mar Apr May Jun Jul Aug Sep Oct N ov Dec 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 Feb Mar Apr May Jun Jul A
112.0
112.5
113.0
113.5114.0
114.5
115.0
115.5
116.0
116.5
117.0
117.5
118.0
118.5
119.0
119.5
120.0
120.5
121.0
121.5
122.0
122.5
123.0
123.5
124.0
124.5
125.0
125.5
126.0
126.5
127.0
127.5
128.0128.5
129.0129.5
130.0
130.5
131.0
131.5132.0
132.5133.0
133.5134.0
134.5135.0135.5136.0
136.5
38.2%
50.0%
61.8%
. L
124.60the Prior
High from2005
118.48 Prior High Support
126.53/52
Fibonacci Cluster 132.12-134.44
124.50/53 PriorHigh
Diagonal fromPrior Highs
Euro Bund Continuous
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
5000
10000
15000
x100
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131132
133
134135
136137
138
100.0%
100.0% 261.8%
109.66 Low
124.60
126.53
118.48 High MAJORSUPPORT
Euro Bund Continuous
Oct N ov D ec 2009 Feb Mar Apr May Jun Jul Aug Sep Oct N ov Dec 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 Feb Mar Apr May Jun Jul A
112.0
112.5
113.0
113.5
114.0
114.5
115.0
115.5
116.0
116.5
117.0
117.5
118.0
118.5
119.0
119.5
120.0
120.5
121.0
121.5
122.0
122.5
123.0
123.5
124.0
124.5
125.0
125.5
126.0126.5
127.0
127.5
128.0
128.5
129.0129.5
130.0
130.5
131.0
131.5132.0
132.5133.0
133.5134.0
134.5135.0135.5136.0
136.5
38.2%
50.0%
61.8%
. L
124.60the Prior
High from2005
118.48 Prior High Support
126.53/52
Fibonacci Cluster 132.12-134.44
124.50/53 PriorHigh
Diagonal fromPrior Highs
Euro Bund Continuous
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Fundamental
Technical
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Disclaimer
Bund Uncertainty
Daily Jun 11 Bund CHART
The pause in the very short-term is
interesting and though not a reversal,merits close attention.
A push up through 124.60 would be
convincing strength; equally, a pull-
back through the rising diagonal
would be telling weakness…
0 17 24 31 7
February
14 21 28
March
7 14 21 28 4
April
11 18 25 2
May
9 16 23 30
June
500000
1000000
119.5
119.6
119.7
119.8
119.9
120.0
120.1
120.2
120.3
120.4
120.5
120.6
120.7
120.8
120.9
121.0
121.1
121.2
121.3
121.4
121.5
121.6
121.7
121.8
121.9
122.0
122.1
122.2
122.3
122.4
122.5
122.6
122.7
122.8
122.9
123.0123.1
123.2
123.3
123.4
123.5
123.6
123.7
123.8
123.9
124.0
124.1
124.2
124.3
124.4
124.5
124.6
124.7
124.8
124.9
125.0
120.92 LowPrior Lowresistance
124.60Brokensupport fromPrior High from2005
. r i r i r r
121.12 Low
PriorLow
resistances 123.00, 122.37
Prior high Pivot 123.92
Euro BundJun 11
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FUNDAMENTALS: CONTINUED
Rumours have been circulating in both the press and the markets recently thatGreece is on the verge of rescheduling her debts, and while these have been deniedthey have persisted and contributed to the Bund rally. Investors have sought tohedge against default of a Euro zone country by buying what is essentially Blue chipGerman debt.
In fact, some finance ministers have publicly begun to entertain the thought of aGreek debt restructure. This has helped ease the current wave of risk aversion andthe Bund has eased lower.
The ECB has today let it be known it is against a debt restructure and said it would
no longer accept Greek bonds if a restructuring went ahead.
While those remarks are unhelpful, it does indicate the level of discussionconcerning debt restructuring. In the end the politicians, not the ECB, will decidewhether or not a Greek or indeed Irish or even Portuguese debt restructure isacceptable.
The markets seem to take the idea positively: stocks have begun to recover, and theBund has eased lower. While a debt restructure could be viewed as a soft default,
since bond holders would have to accept longer repayment periods etc. it wouldcreate them breathing space the Euro zone needs.
Simply put, one year after the Sovereign debt crisis broke, the problem remainsunresolved. The effect of massive rescue fund which was meant to reassure hasbeen neutralized because of the strict conditions insisted upon by Germany. A debtrestructure would allow individual states greater room to manoeuvre.
If such a solution were to be adopted, the Bund could begin a long correction
lower.
Bund Uncertainty
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