Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 25 April 2014 at 11:39 GMT

Bunds — why does nobody believe in new lows?

Chief Economist & CIO / Saxo Bank
By Steen Jakobsen


I have all year called for a new low in DM rates despite the consensus focusing on tapering. Here are two charts both of which state clearly – barring any “surprise” to upside in growth the trend is for one percent Germany rates by August!


Source: Bloomberg and Saxo Bank

Note where channel ends in August – sub-1 percent — but 1.4000 percent is the critical level

More importantly, check out the long term view: Again 1.0 percent Germany and inside 2014….. also 1.4000 the support level for now…(A mere 10 basis points from here.)


Source: Bloomberg and Saxo Bank

Remember our projection on Bunds have been based on our JABA model (Econo-physic) model which indicated back in Q4 that Germany could face close to zero growth by Q4 in 2015.


Finally, My longest used chart for fixed income – confirmation is coming soon…..30-year to 2.50 percent



Source: and Saxo Bank

Remember this trend has continued despite 100 percent of macro strategist thinking US rates will be higher in six months time – despite extreme low volatility & complacency – despite the so-called: Great rotation. Of course it reflects deflation, lack of growth and extremely poor policy responses, which this morning was indirectly admitted by Fed chief Janet Yellen:

 Yellen concerned Fed model offers distorted prediction on prices

 Yes, the policy makers talk, but the market clearly disagree, especially the bond market.

Imagine if Russia/Ukraine “really” is at true geopolitical risk, if lowflation is not transitory, if growth does not come back again this year, if central banks have no alternative at zero bound, if European Central Bank chief Draghi is bluffing (as he often does)….., if China devalues…. ?


No, it will never happen. We have great diplomatic efforts being expended on Russia, central banks understanding the true economy and politicians who are committed and fully in line with the real economy, plus an extremely strong bank sector – The King is dead, long live the King….


Greed is good – Leeman BrothaZ


Nice weekend


benlouro benlouro
very nice cal. agree with it at least for this year


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