Bunds Wagging Treasuries

Take a look at the comparison chart of the nearest Bund and U.S. 10-year T-Note futures.

Contrary to popular belief, this latest bond market sell-off was led by the German Bund and not U.S. Treasuries, flopping due to the current market narrative of a hawkish Fed, though it is a factor.

Global central banks x/ Japan are talking tough, and Europe is in a Yuuuuge bond market bubble, with the ECB way behind the curve.  That is the market where maximum bondholder nervousness lives, in our opinion.

We wonder if there are any Bunds around to trade?

The chart clearly shows the Bund peaking on September 5th versus the September 7th peak of the U.S. 10-year Treasury.

Bund_T-Note

Monitor European Sovereigns

Traders and investors should closely monitor the European bond market because that is where the bubble is and the ECB is way behind the curve given Europe’s improving economic fundamentals.

 

Bond Bubble_1_Sep19

Bond Bubble_2_Sep19

We think a spike in interest rates (which may be the one currently underway) emanating from Europe which spreads to the U.S., though not as acute, is the most likely trigger for an October sell-off in the global risk markets.

Equity markets are getting super lathered up over an event a long way off and has, at best, a 50/50 chance of getting through Congress.  Tax reform.

Yet event risk is legion and ubiquitous.  Any number of events, aside from an interest rate spike, could trigger the correction we are looking for.

Watch 62 basis points on the Bund yield, the 52-week high, which is now only a chip shot away.

Mr. October on deck and ready to celebrate commiserate the 30th anniversary on the 19th day of the month of, well, you know.

Stay tuned.

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