Article / 29 June 2017 at 13:29 GMT

Bunds, Gilts lead bond markets lower

Technical Analyst / FuturesTechs
United Kingdom
  • Hawkish central bankers spur bunds decline
  • Gilt futures moving lower as well
  • MACD and RSI point T-notes lower

Bond charts point lower as central bankers wax hawkish. Photo: Shutterstock

By Clive Lambert

The chart below is the German 10-year bund future, the benchmark for European bonds, and as you can see we've endured some hefty losses in recent days on various (dare I say coordinated?) hawkish comments from the world's central bankers.

Bund future (daily):
Bund Daily

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Source: CQG

We have given back an entire month's worth of gains in a few days, selling off back to levels last seen in May, and are now coming up to some important levels on the "bigger picture" chart.

The low/bounce back in May was 162.01. The low today as I write is 162.25. Below 162.01, the next levels of support are 160.74, 160.08, and 158.68. The latter was the low/bounce last December and a break below here would put a major top on the chart and potentially call an end to the rally that seems to have been going on for my entire career!

Bund (weekly):
Bund Weekly
Source: CQG
We have seen a similar move in the Gilt future, the bunds’ UK cousin:

Gilt futures (daily)
Gilt Futures Daily
Source: CQG
In fact it’s been very neat as we’ve gapped lower for two days in a row and the gaps have done their job. We are now back at Fibonacci support at 125.84 and the last higher low from May at 125.61. 

Breaking this area says we can keep going lower targeting 124.80, 124.40, 123.76, then 121.60.

In the US, Treasury notes topped out last July,and sold off through the rest of the year to a low of 121.195 in mid-December. We then saw a solid, albeit sometimes halting recovery, getting up to 127.08 a few weeks back. 

We broke a short-term uptrend line at the start of this week and have since broken another support level of note at 126.05 and look good to test 125.03, below which we can target further weakness to 124.14, then 123.245, then back to that December low. 

MACD and RSI agree that lower is the path we’re treading now with evidence of bearish divergence on both, similar to that seem this time last year just before the big drop.

T-Notes (daily):
T-Notes Daily
Source: CQG

— Edited by Michael McKenna

Clive Lambert is chief technical analyst at FuturesTechs 


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